ECONOMY

Zachs unable to pay creditors and suppliers

The impending bankruptcy of electronics retailer Zachs is just one of the severe problems the information technology retail sector is facing. Other retail chains, such as Multirama and Microland are also in dire financial straits, while individual retailers have been going under during the past few months. On Friday, Zachs, a medium-sized retailer with 48 outlets across Greece, declared itself unable to pay back a sum of over 13 million euros owed to creditors and suppliers. The unique feature of this case is that the main creditor, Bank of Cyprus, also holds a controlling stake (67 percent) in Zachs through an offshore company, Tefkros Investments Ltd, itself controlled by Bank of Cyprus Ventures. Thus, when Bank of Cyprus decided to pull the plug on Zachs, by taking Tefkros Investments to court demanding sequestration of property, both sides were represented by Bank of Cyprus lawyers. This, according to Kathimerini sources, may lead other creditors to take action for «fraudulent bankruptcy.» «Bank of Cyprus decided to invest in Zachs in mid-2001, at a time when electronics retailers were beginning their downturn. The involvement of (the bank’s) managers in the company was marked by a series of mistaken moves,» said a market professional, who requested anonymity. Kathimerini tried to contact both Zachs management and Athanassios Kyranidis, managing director of both Bank of Cyprus Ventures and Tefkros Investments, with no success. Sources say that Bank of Cyprus managers kept encouraging suppliers to provide merchandise and push back payment dates, because, as they pointed out, the retail chain was «a bank subsidiary,» which was meant to imply that its financial position was not endangered. Zachs was founded with the help of National Bank of Greece’s venture capital division. Through a subsidiary, National held a small stake in the company, which it sold to Zachs Managing Director Michalis Zachariadis. Kyranidis decided to invest 4.4 million euros in Zachs to acquire 30 percent of the company, which was already facing financial difficulties. Little by little, Tefkros Investments accumulated a 67 percent stake, including Zachariadis’s. A capital injection of 4 million euros last August was not enough to turn around the company, as a series of prospective partnerships never materialized.