Fabrikant files for Chapter 11 bankruptcy

William George Shuster -- JCK Online, 11/20/2006 9:20:00 AM

M. Fabrikant & Sons, Inc., a world leader in wholesaling fine diamonds and jewelry, and its domestic subsidiary, Fabrikant-Leer International, Ltd., on Nov. 19 filed voluntary petitions for relief under Chap. 11 of the U.S. Bankruptcy Code. The company's foreign and domestic affiliates aren’t included.

In a Chap. 11 bankruptcy, a company is protected from creditors while it restructures its business, under a court-approved plan that includes repayment of debts.

In a statement, the family-owned and operated company said Chap. 11 proceedings “currently provide the best opportunity to maximize the value of its assets and its business for all stakeholders.”

It also said, the company wills “actively pursue a full range of strategic alternatives, including the sale or refinancing of the firm.”

Fabrikant will continue operating its business while in Chap. 11, with all its facilities expected to remain open on normal schedules. It said it plans to “continue to pay employee wages and benefits, honor customer fulfillment obligations and programs, and make uninterrupted payments to suppliers for goods and services.” The company has negotiated financing arrangements with its senior secured lenders, subject to court approval.

Fabrikant began as a loose diamond wholesaler in New York City in 1895. Today, it operates 20 companies in 10 countries (including Israel, Belgium, India and Thailand), with annual business of about $1 billion, and employs some 800 employees.

Fabrikant’s more recent actions include formation in late 2005 of its diamond jewelry division, Fabrikant Fifth Avenue; the creation in 2005 of Fabrikant-Leer International, a jewelry and solitaire company formed with Leer Gem, Ltd., and in August 2006—as part of “a worldwide review of its operations”—the formation with Tara Jewels, one of India’s largest jewelry manufacturers, of Fabrikant-Tara International LLC, to include the operations of Fabrikant-Leer International, Ltd. Fabrikant said then that the new entity would provide U.S. retailers with “the best merchandise, quality, service and pricing.”