In a detailed statement issued by the troubled Swiss marketing firm, it says it has requested postponement of bankruptcy proceedings and plans to strike a deal with a `strong equity partner?.
It states, however, a number of key properties are safe from any restructuring ? including the prized FIFA World Cup rights.
The full release reads:
?The ISMM Group is in the process of allying with a strong equity partner. At the same time the Group will complete the already initiated restructuring programme. This programme reflects the Group?s intention to focus on its core businesses and to establish a lean and efficient organisation. The equity partner will cover all ongoing operational costs during the restructuring period. Upon successful completion of the restructuring programme the investor intends to acquire a majority stake in the ISMM Group.
In March 2001 when the consolidated ISMM Group result for the year 2000 became available, it was obvious that the Group?s financial obligations were greater than its assets. In accordance with Swiss legal requirements, the Group Management has filed a petition with the Cantonal Court in Zug and sought a postponement of the commencement of formal bankruptcy proceedings for a period of three months.
The range and quality of services in core business areas will not be affected by the restructuring. This includes particularly the 2002 FIFA World Cup Korea/Japan?, the 14th Asian Games 2002 in Pusan, Korea and the 8th IAAF World Championships in Athletics in Edmonton, Canada.
Over indebtedness forced notification
As soon as Management and the Board of Directors became aware of the negative equity position of the ISMM Group, the Board of Directors were legally obliged to notify the Cantonal Court in Zug that certain companies within the ISMM Group were overindebted.
It is now up to the Cantonal Court to decide whether to postpone the commencement of bankruptcy proceedings at the ISMM Group?s request, according to Article 725a of the Swiss Code of Obligations. The Board of Directors has chosen to request postponement on the grounds that the combination of its restructuring measures and the investment by a strategic partner would be likely to safeguard the ISMM Group?s future.
Alliance with a strong equity investor
The consolidation process in the market is accelerating and greater financial resources are needed in the sports media and marketing business. Such financial resources are limited for a privately held company. Therefore, the Group intends to ally with a strategic equity partner and has initiated respective negotiations. One partner has indicated its willingness to provide on an on-going basis funding needed to cover all costs including salaries and employee benefits for up to the three months of the restructuring period. Furthermore, it is the intention that the investor will subsequently acquire a majority stake in the ISMM Group upon successful conclusion of the restructuring programme. Owing to confidentiality restrictions, it is not possible at this stage to provide any further details about the partner and the agreement. The Group's sports federation partners, particularly FIFA, have been informed about these plans and view the proposed restructuring positively.
Restructuring after diversification strategy failed
As communicated previously, the past two years have seen substantial investments. The liquidity needs of these investments exceeded the Group?s financial resources. Furthermore, it has become obvious that these investments would not be able to meet the ambitious profitability targets originally set.
Therefore Group Management has decided to focus on profitable core businesses, particularly such as Football and Athletics. Simultaneously Management is considering the options available to divest noncore businesses, activities and shareholdings.
The range and quality of services in core areas will not be affected by the restructuring. This includes the 2002 FIFA World Cup Korea/Japan?, the 14th Asian Games 2002 in Pusan, Korea and the 8th IAAF World Championships in Athletics in Edmonton, Canada.
Businesses/properties under review
Following its diversification strategy the ISMM Group entered new business areas which were impacted negatively by certain unforeseen developments and turned out to be problematic. In 1999, for example, ISL Worldwide concluded a 10-year contract with the ATP in relation to the Tennis Masters Series. The ISMM Group has also acquired all commercial rights until 2015 for Flamengo and Gremio, two of Brazil?s foremost football clubs. The cooperation with CART and the SuproLeague project (FIBA) did not develop according to plan. The following paragraphs give a short overview of the status quo of these properties.
Tennis Masters Series: ISL Marketing AG has successfully branded and launched the new Tennis Masters Series. Given the long-term nature of the investment, it was clear that this new property would not be profitable in its first year. Losses, however, were greater than expected. This has led to a reassessment of the investment and to on-going discussions with the ATP and the relevant tournament organisers. As soon as the parties have reached a formal settlement, the ISMM Group will together with the ATP make a formal announcement.
Latin American Soccer Investment (LASI): The ISMM Group has acquired all commercial rights for Flamengo and Gremio for the next 15 years. Given the current economic and political climate in Brazil, the lack of a consistent concept for a national championship and certain image problems of Brazilian Football as a consequence of the on-going CPI investigation, the ISMM group is currently reviewing together with its investment partners the appropriate steps to be taken.
CART: On February 28, 2001, ISL Worldwide sent to CART written notice terminating its exclusive marketing representation agreement. This termination followed more than twelve months of negotiations to address numerous alleged breaches by CART of this agreement. CART has now filed suit against ISL, but ISL remains confident of its ability to successfully defend itself against CART?s claims and intends to seek full legal redress from CART.
FIBA SuproLeague: Unfortunately, shortly after ISL Worldwide acquired all commercial rights from FIBA in relation to the FIBA SuproLeague, internal divisions within the sport led to a breakaway league being formed under the supervision of ULEB. Naturally this led to a dilution of ISL Worldwide?s rights and ISL Worldwide is currently working together with FIBA and ULEB to find a solution to the current problem.?
