As troubled speech recognition company Lernout and Hauspie (L&H) filed for Chapter 11 bankruptcy last week, banks estimated that the company can continue operating for only another two quarters, provided credit lines remain open.
In the wake of financial irregularities, rising debt and board resignations, L&H has filed for a Chapter 11 and a concordaat, a Belgian bankruptcy protection.
This means it is safe from being broken up by creditors, and can continue trading as long as discussions are active and the firm is attempting to repay some of its $490m debt to various banks.
As reported last week, $30m was pledged by Flanders Language Valley Fund (FLVF) to John Seo, chief executive of L&H's Korean unit, to assist with 30 startups which became L&H customers.
If these startups are unsuccessful, FLVF will still be responsible for the $30m and may start legal proceedings against L&H. FLVF shares have been suspended on Easdaq.
John Duerden, chief executive of L&H, said the company was facing "a serious crisis" and that the complex issues would take time to resolve. "We will try to keep the company together to develop and realise its intellectual assets and build a future for the company," he said.
Chapter 11 status would give the company "breathing space", he added. "L&H is in active negotiations with additional creditors for new credit lines" after a consortium of banks admitted that they would end further credit to the company.
Duerden outlined three objectives for the company: producing reliable financial statements, maintaining employees and retaining customers. But with the Securities and Exchange Commission investigation, resignations of the founders and pending law suits, it is difficult to see how customers will not be expressing doubts about the firm.
Microsoft has already said it will not use L&H technology in a new tablet PC.
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