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AMCC spin-off possible as EMH financial woes mount

Microscope staff
European Micro Holdings (EMH) has refused to comment on the possibility of American Micro Computer Center (AMCC) being spun back out of the company.

The threat of a spin-off follows a decision by EMH's principal lender NatWest to restructure its loan by lowering the borrowing base so the distributor can only borrow up to 25% of the cost of inventory.

Previously, it was able to borrow up to 100%. The move impairs EMH's ability to finance operations and purchase inventory in large lots, which had enabled it to offer dealers lower priced products.

In a statement, the company claimed the restructuring was also likely to result in it not being able to meet certain financial obligations, including its commitments to the former shareholders of AMCC relating to its purchase by EMH.

If EMH defaults on the obligations, the shareholders of AMCC, which include EMH co-president and co-chairman John Gallagher, "would be entitled to take back their shares of the stock under the terms of a pledge agreement", according to the statement.

In addition, the distributor has until 15 August to repay a loan to South Trust Bank or face the prospect of legal action to foreclose on its collateral. Devin Sullivan, senior vice-president at the Equity Group, a company EMH retained to handle its investor relations, refused to be drawn on any of the matters and claimed the situation was still developing.

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