In what it deemed a “protective action” in response to a lawsuit from Bank Leumi, New York City–based Waldman Diamond Co. and sister company Waldman Diamonds Complete both filed for Chapter 11 on June 2 in New York federal court.
A statement posted on the company’s website said it is “operating as usual” and expects to “come out of Chapter 11 stronger and more robust than before.” The filing does not affect the larger Waldman Diamond Group, headquartered in Israel, the company said. (EDITOR’S NOTE: The previous line has been corrected.)
In a letter sent out to customers, the company said that it has “arranged to continue trading and paying for all goods under normal terms, and we expect all customers to continue to honor our contracts,” adding that the company is “profitable” and enjoys an “impeccable reputation.”
The statement said the filing was in “direct response to legal action by Bank Leumi demanding immediate repayment of its long-standing rolling credit facility.”
CEO Alexander M. Waldman said in the release that after its 35-year lender announced it would stop its financing operations in the United States earlier this year, the bank has “shown no interest in the welfare and stability of its customers.”
According to an affidavit filed in federal court by Waldman, the company has realized $25 million to $30 million annual revenues and is currently profitable. In 1999, it founded diamond jewelry manufacturer Waldman Diamonds Complete. Waldman said that when Complete moved operations to India, it focused on consignment product. However, when Bank Leumi ceased financing, that made collection difficult, and Complete decided to liquidate in November.
Complete’s liquidation caused a “ripple effect in that Leumi reduced its borrowing base, thereby impacting inventory levels and sales,” the affidavit said. “Meanwhile, Leumi began making extreme demands on [Waldman] to, among other things, significantly pay down the line of credit. In fact, between December 2011 and November 2013, [the companies] were forced to pay down the obligations to Leumi in the approximate amount of $3.75 million dollars, which devastated their cash flow.”
The company said that it was engaged in negotiations with Leumi and working on securing alternate financing. However, on May 30, Bank Leumi petitioned the New York State Supreme Court to serve a temporary restraining order on the company, which came as a “complete shock” to Waldman, it said, leaving it with “no choice” but to file Chapter 11.
Bank Leumi told JCK it does not comment on individual clients.
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