The downfall of Folli Follie
Jewelry group revealed to have cooked figures of its Asian subsidiary; Koutsolioutsos family departs
Folli Follie faces the threat of closure following the revelation of a hole of $290 million in the luxury jewelry company’s cash reserves last year and $1 billion in Asia sales. These discrepancies are even greater than the most pessimistic estimates, including those by hedge fund QCM, which brought the case to light last May.
This was the outcome of the preliminary report by Alvarez & Marsal that collected the data from Folli Follie’s activity in Asia. The report led to the departure of the company’s founders and leading executives Ekaterini and Dimitris Koutsolioutsos late on Tuesday.
Invited to probe the troubled enterprise, Alvarez & Marsal also identified losses instead of profits, cash reserves that were far below those declared, smaller requirements than those announced in the group’s financial reports and double the obligations.
Given that key financial and legal advisers to Folli Follie have already resigned, there are serious doubts over whether the company will be able to present an integrated streamlining plan and an investor by November 12, when its application for protection from creditors is to be examined. If it misses out on that protection it is seen as certain that its creditors – who have been misled about Folli Follie’s fundamentals – will act immediately, demanding the liquidation of assets, which will lead to a shutdown.
The differences between the actual and declared figures of Folli Follie for 2017, according to Alvarez & Marshal, are chaotic and leave no room for any optimism. In fact the data only concern the group’s subsidiary in Asia, FFG Sourcing, and a more extensive probe into the figures of the rest of the group may also be required.
The report showed that the group’s sales last year were less than half of the declared 1.42 billion euros, as some 850 million euros of the volume in Asia is missing; out of the 446.34 million euros declared in cash reserves, 252 million is missing too. Given that the group’s loans add up to 612.6 million, they exceed the actual sales of 570 million euros.