Clothing manufacturer and retailer Baltika Group said on March 25 it had filed an application with Harju County Court for reorganization in the wake of cashflow difficulties. On Thursday, the court decided to grant these proceedings to start.
Baltika says that COVID-19 coronavirus is having a negative impact on its financial results and liquidity, most notably in Lithuania where all stores have been closed since March 16 by government order.
In Latvia, stores are working shortened opening times on weekdays and closed at weekends. Since Baltika's outlets are mostly in shopping malls in Estonia, this will have an effect too from today, Friday, when all non-essential stores in malls are closed.
Non-recurring costs related to restructuring, mostly discontinued production in Estonia, have also negatively affected results, the company says, adding that its financial difficulties are temporary in nature.
The company announced in November it was to cease its production in Estonia, leading to 300 layoffs, in the Lasnamäe district of Tallinn and in Ida-Viru County.
The company has applied for the opening of reorganization proceedings, which it says is the best way to protect the rights and interests of its shareholders, employees, creditors and partners.
Baltika will be able to overcome its liquidity issues and restore liquidity, improve profitability and ensure sustainable management of the company, via the reorganization and other measures, it says.
"This is also supported by the restructuring and business model improvement efforts already made within the Baltika Group, such as reducing production costs by closing production operations in Estonia, and various other measures aimed at cutting fixed costs," the company said, via a press release issued to the Tallinn Stock Exchange.
If Baltika's reorganization is successfully completed and the company's financial difficulties overcome, it will be possible to continue with Baltika's operations and retain many valuable jobs, the statement added.
Following the commencement of the reorganization proceedings, Baltika must prepare its reorganization plan, by a court-set deadline of 1 June 2020.
Baltika Group operates a chain of clothing stores in the Baltic States and other countries, and is behind the Monton, Mosaic, Baltman, Bastion and Ivo Nikkolo brands.
Editor: Andrew Whyte