By Elias Hazou
CHRISTOS Orphanides, founder of the eponymous – and now debt-ridden- supermarket chain, is rumoured to be behind a venture to set up a new retail franchise.
The new chain, GRV, has been running job ads in the press, seeking a general manager, a senior accountant and a head of marketing and sales. According to the advert, the company “is launching its operations nationwide.”
A string of media reports have been suggesting that Orphanides is involved in the new business venture – and this while his own company Orphanides Supermarkets is currently under receivership.
The claims surrounding Orphanides’ involvement are largely anecdotal; however, the magazine ‘In Business’ has done some research and found that the sole shareholder/owner of Micro Stores Ltd is a certain Pantelis Demosthenous. According to the publication, Demosthenous is an acquaintance of Oprhanides and the latter’s best man.
The Mail was unable to get in touch with Micro Stores. But sources have confirmed the buzz in the retail business, adding that Orphanides’ participation is an open secret.
What they have been hearing is that Orphanides has been buying up premises which up until now had been rented out by the old supermarket chain, in order to now house Micro Stores’ outlets.
One source familiar with the supermarket’s saga said Orphanides’ possible connection to the new venture, be it covertly or even openly, is strictly speaking legal.
There is nothing in Cyprus law preventing an entrepreneur who has been declared insolvent to engage in a new business.
It’s more of an ethical question, the source said.
Orphanides Supermarkets may be a zombie company, but officially it has yet to be declared insolvent. It’s currently under receivership by two administrators, one appointed by the former Laiki Bank (the chain’s largest creditor), the other nominated by Orphanides himself.
The chain owes the banks (Laiki and Bank of Cyprus) a reported €150m, and some €85m to other creditors, such as suppliers.
A petition to wind up the chain and declare it insolvent has been filed by GRV North Fruit, one of the chain’s major suppliers. The application has been filed with Larnaca district court, where hearings are scheduled to begin on June 21.
While the court case is being heard, Orphanides Supermarkets can continue normal trading but are legally prohibited from selling off any assets.
Should the petition succeed, liquidators would step in to seize the company’s assets. These would then be distributed on a pro rata basis among all the company’s creditors, both those holding secured debt (the banks) and unsecured debt (suppliers and other commercial creditors).
In the event GRV North Fruit wins, the subsequent court order to liquidate the supermarket chain would also legally void any misappropriations of the chain’s assets that took place in the interim.
In short, the creditors would select the liquidator to wind down Orphanides.
And if it all pans that way, then – and only then – can the liquidator initiate disqualification procedures against executives of the supermarket chain.
Under the Companies Law, a person found in breach of his or her fiduciary duties toward a company may be prevented from being appointed as a director of a limited company.
Section 180 (‘Power to restrain fraudulent persons from managing companies’) states that where in the course of winding up a company it appears that a person has been found guilty of either fraudulent trading or breach of duty, “the Court may make an order that that person shall not, without the leave of the Court, be a director of or in any way, whether directly or indirectly, be concerned or take part in the management of a company for such period not exceeding five years as may be specified in the order.”
Whether it ever comes to that is another matter, said another source who wished to remain anonymous.
Either way, he said, he was not aware of a single case here of disqualification sanctions being taken against a businessperson.
The source, knowledgeable about the Orphanides story, said he had no doubt the court would find Orphanides Supermarkets to be insolvent.
But, he stressed, that in turn would open up whole new can of worms. That’s because, with the demise of Laiki, all its loans and assets have been transferred to the Bank of Cyprus. Laiki’s loans to Orphanides Supermarkets were evidently non-performing and as such should normally have ended up in the ‘bad’ Laiki along with the other toxic assets when that bank was broken up, but they were not.
Instead, under a Central Bank decree, the entire loan portfolio of Laiki has been lumped onto the Bank of Cyprus, since under the deal to wind down Laiki the latter’s Emergency Liquidity Assistance funds have been transferred onto the Bank of Cyprus.
Once the ongoing due diligence of Laiki and Bank of Cyprus has been completed, and after Orphanides has been formally declared insolvent, the Bank of Cyprus will find itself saddled with more bad loans than anticipated.
“And then all hell’s going to break loose,” the source said, alluding to the Bank of Cyprus’ balance sheet.