Saudi Cable says Turkish appeal court overturns subsidiary’s bankruptcy

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Saudi Cable Co. (SCC) issued a clarification regarding the ruling of Turkey's appeal court to overturn the bankruptcy (liquidation) decision previously issued against Elimsan, its subsidiary in Turkey.

In a statement to Tadawul, the company said its board decided on Oct. 11, 2021, to take the necessary actions to protect Elimsan Salt Cihazlari ve Elektromekanik San ve Tic A.S. by applying the debt protection law (financial restructuring).

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Elimsan is 94% owned by Mas Kablo, a subsidiary, which is 100% owned by Saudi Cable.

On Feb. 7, 2022, the debt protection (financial restructuring) application was submitted to the court. The next day, Feb. 8, 2022, a temporary and precautionary financial restructuring order was issued for three months. On June 8, 2022, the order was extended for an additional two months.

However, the court decided to end the financial restructuring on July 6, 2022, stating that the company no longer needed legal protection. The court also requested a plan for operational restart, which the company did not submit. As a result, an appeal was filed against the decision to terminate the financial restructuring on Aug. 9, 2022.

Elimsan filed an appeal on Aug. 9, 2022. On Nov. 24, 2022, the appeal court annulled the initial court decision, placing the company under financial restructuring for one year. However, on Oct. 4, 2023, the court annulled the appeal decision. Subsequently, on Nov. 15, 2023, a petition was submitted to the Supreme Court of Appeals challenging the annulment decision.

On June 5, 2024, the court declared Elimsan bankrupt and ordered its liquidation. In response, on July 22, 2024, a petition was submitted to the Supreme Court of Appeals against the decision to declare Elimsan bankrupt.

The company clarified that it received a letter from its attorney on Dec. 14, 2024, regarding the ruling by the Turkish Court of Appeals on Nov. 20, 2024, which overturned the bankruptcy (liquidation) decision issued by the First Kocaeli Commercial Court for Elimsan.

As a result of this ruling, no further action will be taken against Elimsan by its creditors, and the bankruptcy decision is no longer valid. The responsibilities of the bankruptcy administrator have ended, with the authority to manage the subsidiary transferred to the board of directors and the company's executives. The bankruptcy administrator’s oversight has ceased, and the power to represent the company has reverted to the company’s managers.

Saudi Cable further clarified that, based on the board’s decision No. 01/2024 dated March 3, 2024, regarding its exit from investments in Turkey, which was announced on Tadawul on March 5, 2024, it had already set aside provisions for the full value of its investment in Turkey.

Consequently, the value of this investment is now recorded as zero in the company’s accounting books. Therefore, the decision will have no material financial impact at this time and does not meet the disclosure requirements.

The company noted that when the Turkish court issued its liquidation ruling on June 5, 2024, there was no positive or negative financial impact, as the value of the investment had already been written down to zero in the parent company’s books and the audited consolidated financial statements.

However, the recent Turkish Court of Appeals decision on Nov.  20, 2024, to annul the liquidation ruling is significantly different, as it restores the management’s authority to act on the company’s assets, which will have a substantial financial impact although the exact value has not yet been determined.