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Belvédère's condition has deteriorated markedly after losing its legal protection from creditors. So, is the Sobieski vodka maker finished?

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Yesterday (7 June), a French court ripped up a ten-year, EUR375m (US$547.9m) debt repayment plan designed to help Belvédère emerge from bankruptcy protection and meet its obligations to major creditors.

In summary, the court in Dijon decided that Belvédère broke the rules enshrined in the plan, less than a year into the timetable.

After a tumultuous couple of years, and just when things appeared to be back on-track, Belvédère is back in intensive care. Is it curtains this time? Well, the group is certainly a regular at the last-chance-saloon bar, but there could be some way to run yet.

This is mainly because Belvédère's major creditors do not appear willing to switch off the drinks firm's life support.

One law firm working with the creditors told just-drinks yesterday: "[This] judgment means that Belvédère's creditors could demand immediate payment of what they are owed." They could do it, but would this be the best way of getting their money back? Creditors' initial hesitancy to do so suggests that Belvédère has some breathing room.

Group CEO Jacques Rouvroy played on this today, when he said that a fresh agreement with creditors is "in everyone's interest". The firm is open to a deal, he said. Well, it can't really afford not to be, can it?

Backing up the group's case for survival is improving sales, which rose by 16.5% in the first quarter of 2011, to EUR141.8m.

A fresh repayment deal could well be on the cards, but Belvédère could face tougher terms this time around.

In particular, creditors could scrutinise the group's disposals strategy. Asset disposals were supposed to be a key part of Belvédère's original repayment plan and creditors are believed to have been annoyed at Belvédère's lack of progress in this area.

In December 2010, Belvédère put the sale of its Marie Brizard unit on hold, citing "strategic reasons".

One thing for now is clear: the French group's fate does not lie entirely in its own hands. It must persuade creditors that the core business is worth more to them than the sum of its parts.


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