Kontrax Group, the Hungarian computer distributor and telecommunications giant, initiated bankruptcy proceedings on behalf of its six key component businesses after five of its 23 creditors rejected the debt restructuring and cost-cutting programme. In a pre-scheduled address to an international banking conference attended by the Czech and Slovak finance ministers where he was to have delivered a lecture on setting up direct sales operations in Eastern Europe, Kontrax president Gabor Dixco told an embarrassed audience that the global recession, poor financial management and lack of support from the banks were to blame for the company’s collapse. Disco said We may have made some mistakes in our business plan when we chose to go for growth. All steep growth patterns will go with a negative cash flow and a condition for this is loyal dedicated banks and loyal employees. Disco added It is natural that a young growing company will not bother with bureaucratic controls and they often have weaker and smaller management – especially in Eastern Europe. The fall of Kontrax is bad news for Mirror Group pensioners – Maxwell Communications Corp Plc owned 30% of the firm, for Compaq Computer Corp – which will now have to try to retrieve its first consignment of personal computers destined for the company from Hungarian customs authorities, and Disco himself, who opted to build his flat on top of the multi-million dollar Kontrax office building. Kontrax had secured the consent of most of its creditors and received ‘strong support’ from the banks before the impasse (CI No 2,148). The main thrust was to consolidate the company’s $53m debt into a low interest syndicated loan and a bond that would not begin to mature for two and a half years. It had hoped that under 100 of its 360 staff would lose their jobs, hoped that many would stay in work as employees of Kontrax’s 15 dealers, which were wholly-owned but were to have been sold off as franchises under the scheme. Kontrax began life as a photocopier distributor in 1988, founded with 675 Forints of capital – just $75 – and reported sales of $81m in 1992.
