Legacy Distribution Group, Inc.
31 January 2007
Legacy Distribution Group Inc.
(the 'Company')
This announcement is provided by way of an update to the announcement made on 8
December 2006, which resulted in the suspension of trading in the Company's
shares.
Background to the suspension of trading
Fred Gretsch was appointed as the Company's Finance Director on 12 June 2006.
Following the publication of the Company's interim results on 28 September 2006,
at the request of the Board of the Company (the 'Board'), Fred Gretsch commenced
a review of the Company's financial systems. During this process, Mr Gretsch
experienced difficulty in reconciling the management accounts for the 9 months
to 30 September 2006 with the published interim results to 30 June 2006. This
led the Board to question the appropriateness of the Company's financial systems
and their ability to provide the Board with accurate financial results.
As a consequence, on 8 December 2006, the Company requested and was granted a
suspension of the trading in its shares pending further investigation and
clarification of its financial position.
Post suspension update
Since the suspension of trading in the Company's shares, the Board, led by the
Non-Executive Directors and Mr Gretsch, has continued its investigations into
the financial and trading position of the Company. Whilst the review process is
still ongoing and no firm conclusions have been reached as to the full extent of
the problems faced by the Company, it has become apparent that the Company has
been trading unprofitably for some time.
This unprofitable trading has resulted in the Company breaching certain of its
banking covenants which it has not been possible to remedy. As a consequence,
the Company has received a demand for immediate repayment of all amounts
outstanding to its principal bank.
The financial uncertainty surrounding the Company has meant that suppliers have
been unwilling to provide credit terms to the Company to enable it to make
necessary inventory purchases. This has made trading extremely difficult.
The bank is currently undertaking its own detailed review of the financial and
trading position of the Company to establish the options available to it to
maximise the amounts recoverable by it. In addition to this, a Notice of Summons
for a Chapter 7 Involuntary Petition has been filed on Best Candy & Tobacco
Company, the Company's trading subsidiary, by three of its creditors. If the
petition is approved, the business will cease operations and a trustee be
appointed to realise value for creditors.
The Company will make a further announcement as soon as is practicable.
Director resignations
In light of the above and as announced on 30 January 2007, at the request of the
independent Non-Executive Directors of the Company, Frank Patton and Tim Riedel,
the Company's Chief Executive Officer and Chief Marketing Officer respectively,
resigned with immediate effect.
This information is provided by RNS
The company news service from the London Stock Exchange