Elliott Greenleaf Newsletter: New Delaware Chapter 11 – Exelco North America, Inc.

 

On September 26, 2017, (the “Petition Date”), Exelco North America, Inc., Exelco NV, FTK Worldwide Manufacturing BVBA, and Ideal Diamond Trading USA Inc., (collectively, the “Debtors”) each filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware.

 

The Debtors are represented by Hughes Hubbard & Reed LLP, as lead counsel, and Young, Conaway, Stargatt & Taylor, LLP, as Delaware counsel. The case has been assigned to Bankruptcy Judge Kevin Gross. A hearing on the Debtors’ first day motions has not been scheduled since the first day motions have not yet been filed. A meeting to form the Official Committee of Unsecured Creditors has not been scheduled.

  

 

The Debtors are a wholesaler and polished manufacturer of diamonds that offer rough diamonds, core polished diamonds, branded diamond jewelry, and signature cut diamonds for leading diamond retailers internationally.  The Debtors’ rough diamonds are ethically sourced from areas that are free of conflict and abuses of human rights. All stones for their manufacturing needs are received directly from the De Beers affiliate DTC and other BPP-compliant companies.  From the time the rough stones leave their global DTC sights each diamond is traceable.  The Debtors’ software allows them to be fully aware of where every diamond is and who has touched it.

 

The Debtors operate as midstream diamond buyers and suppliers, whereby they purchase diamonds from mines which are then cut, polished or set and resold to commercial jewelry retailers. By its nature, the Debtors diamond business is a global enterprise with operations in numerous foreign countries including the United States, Belgium, Mauritius, Israel, Botswana, Hong Kong, the United Kingdom, and Thailand.

 

The company was co-founded in 1993 by Jean-Paul Tolkowsky, a seventh-generation diamantaire, with Leon and Lior Kunstler. The Tolkowsky name is well known in the diamond industry.  Marcel Tolkowsky, invented the ideal-cut round brilliant diamond in 1919 and Tolkowsky was chosen by De Beers to cut the 546-carat Golden Jubilee diamond, the largest faceted stone in the world.

 

Earlier this year, the Debtors lost their status as one of De Beers’ primary customers, known as sightholders, as they have been buying fewer diamonds from the top producer in recent times.  The Debtors are now accredited buyers, meaning they are not guaranteed a set supply of rough diamonds and instead buy on a more ad hoc basis. 

 

 

In July 2017, a Belgian court ordered lender KBC Group NV, a Belgian bank, to return seized assets from the Debtors.  In its ruling, the court found that the Debtors were on track to repay loans to KBC by 2020 as planned, so the seizure of assets was unnecessary.  At that time, KBC was seeking to recover 26 million euros ($30 million U.S. dollars).  It is also reported that the Debtors have credit lines with Standard Chartered Plc.

 

KBC Bank NV continues to pursue a legal action before a Belgium court which seeks to seize and liquidate the assets of Debtor Exelco NV.

  

 

No first day motions have yet been filed.

 

If we can be of service, please contact me.  We will be happy to discuss first day motions when they are filed and forward an updated link upon request to the documents.