Israel-based synthetic-diamond producer Lusix has asked a court for temporary protection from creditors amid debts of around $28 million, according to a report in the country’s media.
The company submitted the request for a six-week stay of proceedings after appealing to shareholders for a cash injection of $22 million last week to enable it to continue operating, Israeli news site CTech reported Monday. The company will become insolvent if it does not receive the funds and is negotiating a merger with another Israeli company in the same field, the report said.
Founded eight years ago by technology entrepreneur Benny Landa, Lusix rose to prominence in 2022 when LVMH Luxury Ventures invested in the business. The company synthesizes diamonds via the chemical vapor deposition (CVD) method at its factory in Modi’in, Israel. It has raised more than $150 million from investors to date, according to the report, and Landa retains a 25% holding.
Lusix was unavailable for comment at press time.
A collapse in the price of rough lab-grown diamonds led to Lusix’s difficulties, CTech explained. The company became profitable by 2020, but prices slid 90% between then and June 2022, and the business laid off 80 employees in the past year.
The company’s request also blamed the “general global situation” and the Israel-Gaza war, which increased the cost of raw materials and caused delays to the transportation of goods, as well as the expenses involved in the launch of its Modi’in factory, the report said. Lusix had to secure bank financing and register liens on its assets between 2021 and 2023, according to the news site.
“Recently, in light of the company’s cash-flow distress, the company began receiving warning letters from various creditors threatening to cut off electricity to its factories and take legal action against it,” the request said. “In view of the ongoing merger talks, the drop in laboratory-diamond prices, and the negative cash flow, combined with the notices the company has received from its creditors, there is insufficient time left for the company to stabilize independently outside of court. Therefore, it deems it appropriate to request a stay of proceedings to formulate a debt settlement.”
The company’s debts are to banks, a retail company, and suppliers, and it has put 60 of its 90 employees on leave without pay, according to the report. The company outlined a plan for paying off its debts within five years and for operating during the delay to court proceedings, the site added.
“Lusix was established to bring the leadership of the diamond sector back to Israel,” the report quoted Landa as saying. “There is no shame in trying and reaching this situation. I am very proud of the company and hope that it will succeed in embarking on a new path.”
Image: Benny Landa. (Landa Corporation)
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