Failing to win support from creditors for a restructuring plan, Holzmann filed for insolvency March 21 at a Frankfurt court. An insolvency team quickly moved in, led by a court-appointed attorney.
Holzmann's downfall emanates from the 1999 discovery of huge hidden losses, mainly in European real estate operations and unsuccessful investments in eastern Germany after the country's reunification. The company moved briefly under court protection until German Chancellor Gerhard Schroeder arranged a bank-backed bailout. The company had been seeking a merger or acquisition since December, but a deal could not be brokered in time. Holzmann's debt to some 20 banks remains at around $1.3 billion, with the firm set to report another loss for 2001.
Jones CEO Al Neffgen says the Charlotte, N.C., firm will continue operating normally with financial "firewalls" already implemented between itself and Holzmann. "Over the past three years, measures have been put in place to insulate J.A. Jones from the possibility of a Philipp Holzmann insolvency," he says. Neffgen contends that Jones enjoyed its "second-best year in 112 years in terms of profits." He says the company had a 16% return on equity, with a backlog at $4.5 billion. "We cannot guarantee Holzmann's debt, nor they ours," he says. "All they can do with us is sell our stock."
Neffgen says he "deeply regrets what's happened" at Holzmann. "There are some great people there." But he also disputes German press reports that the insolvency is threatening Jones' federal work, including a 615,000-sq-ft courthouse in Seattle. "There have been no cancellations," he insists. Neffgen contends that Holzmann's difficulties are also related to a seven-year-long recession in the German construction market and to restrictive craft labor agreements. "They still had to make payroll," he says.
Jones' potential acquisition by Germany's Mannheim-based Bilfinger+Berger A.G. will be complicated by the insolvency, says B+B spokesman Michael Weber (ENR 3/25 p. 7). Other contractors, including main rival Hochtief A.G., Essen, say it would also be interested in buying parts of Holzmann. "But at the moment, we haven't had any discussions," says Hochtief's chief spokeswoman, Jutta Hobbiebrunken.
In Germany, "we are trying to keep viable projects going and we are trying to secure work places for our people," says Holzmann board member Herbert Lütkestratkötter. The management team will remain in place "for at least some time," he adds.
At press time, the court-appointed administrator was attempting to secure credit from Frankfurt-based Holzmann's existing banks and others to keep the firm and key German contracts afloat. "The selection of projects will [heavily] depend on the availability of credit," says Lütkestratkötter. The administrator will need two to three months to assemble a register of assets and liabilities before the company's fate can be clarified. Deutsche Bank is Holzmann's largest investor with about 20% of the stock, and it is also the largest creditor, owed nearly $300 million.fter 150 years in business, Germany's one-time construction leader is under court protection, scrambling to keep key projects going in the face of insolvency. The fate of Philipp Holzmann AG and its 12,000 German employees alone will be uncertain for months. But international operations, dominated by its U.S. contracting arm, J.A. Jones Inc., should suffer the least disruption.