5,700 jobs in danger as fridge firm fights closure

Major Spanish electrical appliance maker Fagor, which employs 5,700 people worldwide, opened talks with its creditors on Wednesday to try to avoid bankruptcy.

5,700 jobs in danger as fridge firm fights closure
2,000 of Fagor's 5,700 workers are based in the Basque Country. Photo: Rafa Rivas/AFP

The maker of everything from small appliances to washing machines, fridges and kitchen furniture said it had started negotiations to restructure its debt, estimated by the Spanish media at €800 million ($1.1 billion).

"The company has up to four months to negotiate an agreement with its creditors," said a statement issued by Fagor, part of sprawling Mondragon group created six decades ago in the northern Basque Country region.

Fagor said it had informed the commercial court in San Sebastian of the negotiations.

Initial talks began weeks earlier between the Mondragon group, the Basque government, creditor banks and other lenders with the aim of enabling Fagor to deal with immediate payments due and to normalise its business activity, it said.

The pre-bankruptcy procedure was recently introduced into Spanish law to give businesses extra time to avoid filing for bankruptcy.

Basque regional government spokesman Josu Erkokera said rumours of a Fagor bankruptcy amounted to the "worst financial news" of the year for the region, where 2,000 of Fagor's 5,700 workers are based.

The Mondragon group was founded in the 1950s by local priest Jose Maria Arizmendiarrieta as a small workers' cooperative and is now an international conglomerate with a mission of maintaining jobs.

Its various branches, present in 20 countries, include industry, distribution and finance.

Foreign sales reached nearly €4 billion ($5.2 billion) in 2011, accounting for two thirds of the corporation's industrial division, which produces consumer electronics, car parts, machinery, sports gear and more.

Despite its international presence, Mondragon's cooperative structure has kept most of its jobs and production in Spain, with 35,000 employees in the Spanish Basque Country, 35,000 elsewhere in Spain and about 13,500 abroad.

Most of its workers are partners in the firm, voting to elect the bosses and make sensitive decisions.

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Breaking: Banco Madrid files for bankruptcy

Banco Madrid is to enter insolvency proceedings, announced administrators on Monday, just days after the striken bank was taken over by Banco de EspaƱa.

Breaking: Banco Madrid files for bankruptcy
Photo: Gerard Julien/AFP

Banco Madrid will enter insolvency proceedings and suspend all activity, after significant deposit withdrawals, the country's central bank announced in a statement on Monday. 

The news came days after the entire board of Banco Madrid resigned and handed management over to the Bank of Spain on Thursday, March 12th. 

The change of management came after the central bank launched an investigation into accounts at the lender for suspected money laundering activities. 

This came about after legal action was taken by US law enforcement authorites on Tuesday against the parent company of Banco Madrid, Banca Privada de Andorra (BPA). 

"This decision comes in response to the sharp deterioration of Banco Madrid's financial situation as a consequence of the important withdrawals from client funds after the latest events which have affected its capacity to meet its obligations," Banco de España said in a statement, released on Monday morning. 

Deposits were protected by the Spanish deposit guarantee fund of up to €100,000 ($105,350) per client, the bank said.