Diamond co. says financing troubles led to Chap. 11
June 11, 2014
New York--A New York-based loose stone dealer and its associated manufacturing firm have filed for Chapter 11 bankruptcy protection, citing woes brought on by consignment and the exit of its longtime lender, Bank Leumi, from the diamond industry.
Alexander M. Waldman Diamond Co. Inc. and Waldman Diamonds Complete LLC both filed voluntary petitions for Chapter 11 in U.S. Bankruptcy Court in New York on May 30, court records show.
Started in 1978, the Alexander M. Waldman Diamond Co. buys and sells loose polished diamonds, mostly to small and mid-sized jewelry chains in the United States. Waldman Diamonds Complete was founded in 1999 as a diamond jewelry manufacturer.
In an affidavit accompanying the Chapter 11 filing, Alexander Waldman said that Waldman Diamond Co. is “currently profitable” but has been dragged down by problems surrounding Waldman Diamonds Complete. Over the years that company has “experienced a series of changes in business model that, exacerbated by Leumi’s unwillingness to continue the business, led to its ultimate demise and current wind-down status,” court papers state.
In a separate statement posted online, Waldman said Bank Leumi has “shown no interest in the welfare and stability of its customers” since it announced its intention to shut down its U.S. diamond jewelry financing portfolio by the end of the year.
“We have taken robust defensive action in order to ensure the long-term continuity of our U.S. business, to protect our staff, and to enable us to maintain the reliable service that we provide to our customers,” he said.
Bank Leumi said it does not comment about individual clients.
According to the affidavit, chief among Complete’s problems was the company’s decision to relocate its manufacturing from New York to India, which it said resulted in quality-control issues and higher return rates, and Complete’s shift toward offering more goods on consignment.
This became especially problematic after Bank Leumi, which had been the company’s lender for 35 years, ceased financing because it made collection difficult, the affidavit states.
In November 2013, Complete began liquidating.
The company’s inability to remain profitable had a “ripple effect” on Waldman Diamond Co., which saw its borrowing base reduced. At the same time, Bank Leumi began making “extreme demands” on its debtors, forcing Waldman Diamond Co. to pay down obligations, which devastated its cash flow, according to the affidavit.
Bank Leumi eventually commenced replevin action (action demanding immediate payment of its credit facility) against Waldman Diamond Co.
On May 30, the New York State Supreme Court issued a temporary restraining order against Waldman Diamond Co. in connection with the replevin action. Waldman filed for Chapter 11 that same day and, according to Alexander Waldman’s online statement, that legal action has been withdrawn and the company is “operating as usual.”
“We are confident that, after restructuring our banking in New York, the company will come out of Chapter 11 stronger and more robust than before,” he said.
Waldman Diamond Co. and Waldman Diamonds Complete are sister companies to the Waldman Diamond Group headquartered in Israel, though the bankruptcy filing does not affect the Waldman Diamond Group.