Personnel at 30 SPAR stores in Estonia, 25 in Lithuania and six in Latvia, as well as their suppliers, were in a state of panic last week following the sacking of Guido Parnits, a top manager at Estonia-based Baltic Food Holding, which owns SPAR.
Christjan Thjomi, representative of Norway-based Selvaag Invest, which owns 70 percent of Baltic Food Holding, told The Baltic Times the chain would now be liquidated. He sought to dampen speculation that it might be bought by one of its rivals - possibly the Baltic states' largest food retailer Vilniaus Prekyba.
On Nov. 1 Parnits was replaced by Peeter Sepper, a veteran bankruptcy administrator.
Speaking to the Estonian business newspaper Aripaev, Parnits blamed the company's downfall on Selvaag Invest's failure to support the chain's expansion by providing extra liquidity.
Sepper told the private TV channel TV 3 the company might file for bankruptcy in a few weeks.
Baltic Food Holding's other main shareholders are private investors, who own 20 percent, while the remaining shares are owned by Sweden's Axfood and the European Bank for Reconstruction and Development.
This May, Selvaag Invest made a last ditch attempt to save the company, investing $3.3 million, said Thjomi.
"My role was to save the company, find a solution, find some capital and sell it, but it was not possible," said Thjomi. "The sales were low and costs were high. The price margins were wrong and the company was mismanaged."
Baltic Food Holding had promised Selvaag Invest a profit of 16 million kroons ($900,000) by the year's end, he added. Instead its losses had reached 95 million kroons by the end of September.
"The owners were told Baltic Food Holding was working profitably, but it was actually going more than 10 million kroons further into the red each month," he said. "At an audit in August it emerged that the managers had been hiding the actual results."
In total the company owes 200 million kroons to Estonian companies, 170 million kroons to Lithuanian companies and 30 million kroons to Latvian companies, said Thjomi. Spar's retail shops in Lithuania and Latvia have closed, while most of the stores in Estonia continue to operate.
Lehepunkt, a distributor of newspapers and magazines, was the first creditor to file a petition with the Tallinn City Court on Nov. 2 for the bankruptcy of Baltic Food Estonia, from which it is claiming 800,000 kroons. It expects a response by Nov. 17.
On Nov. 1 food wholesaler ETFC, which is owed around 5.5 million kroons, called on all creditors to pursue their claims and by Nov. 5 a total of 85 creditors with claims totaling 30 million kroons had contacted ETFC.
"All the creditors are depending on us," said Lehepunkt's sales manager Allan Liima. "We hoped to come to a normal agreement with the company, but it did not work. Baltic Food Holding is a good seller, but a bad payer. I believe the problem lies in the company's ownership rather than the management."
Ruth Roht, spokesman for ETFC, said ETFC had been unable to contact the management of either Baltic Food or its sister company Dagab Baltic.
Sirje Potisepp, head of alcohol distillers Remedia, said his company went to Dagab on Oct. 30 to claim back goods it had supplied. "We took real action, even involving security personnel," commented Potisepp. "They did not want to return the goods they had not paid for and claimed they were now pledged to Hansapank."
Liima predicted Lehepunkt would not get much money from Baltic Food Holding because Hansapank, which lent the company 70 million kroons, would take priority over other creditors. The bank has frozen Baltic Food Holding's accounts.
Hansapank's earlier suggestion that the company should be sold to a strategic investor had been rejected by the management, said a bank official.
Lithuania-based Vilniaus Prekyba has expressed an interest in adding the Spar chain to its 130 stores in Lithuania, nearly 20 in Latvia and one in Estonia.
"We have never offered to buy Baltic Food Holding or SPAR operations," said Ignas Staskevicius, head of Vilniaus Prekyba. "But at the same time I can confirm that we are greatly interested in expansion of our retail operations in the Baltics and Estonia in particular. We would be glad to look at any serious offer regarding the take-over of SPAR stores or operations. I believe Vilniaus Prekyba to be in a very competitive position to go for such an option in this period."
But Thjomi was skeptical of a take-over at this stage. With the company in debt shareholders would have to pay additional money to any buyer, which they would not be prepared to do, having already invested over 200 million kroons, he said.
However, Timm Ritari of the debt collecting company Ad Finem Inkasso, commented that the Spar stores in Lithuania would probably be opened on Nov. 9, if negotiations with a new investor succeeded.