Court grants Mentergy 40-day stay of proceedings

An Israeli court today granted troubled Mentergy (Nasdaq:MNTE) a 40-day stay of proceedings, until November 12, 2002..

Tel Aviv District Court judge Varda Alshech appointed Doron Tishman as trustee for the company and directed him to prepare a recovery plan for the company ahead of another court hearing at the end of the stay.

Previously Alshech had rejected the remote learning company's recovery plan, which she said lacked substance. She gave the company 12 hours to file clarifications.

When applying for the court's protection, Mentergy said that cash flow difficulties were hampering its regular operations and that it could not meet its liabilities, including salaries of employees and payments to suppliers.

It also noted that two of its external directors had quit, making the company breach the regulations of the New York exchange.

The company said its debts to secured creditors, including banks Hapoalim, Leumi and First International Bank, total $12.5 million, of which almost 50% are in the form of convertible bonds.

The rehabilitation plan that the judge scorned includes layoffs and the transfer of key workers to subsidiaries, reduction of debts to creditors, and the sale of some remote-learning operations in deals that would generate future royalties. It also discussed having its subsidiary Satcom issue bonds, and using some of the proceeds to honor its own debts.

Mentergy also proposed to sell assets and reorganize its group operations, including possibly selling the shell company traded on Nasdaq, while recruiting fresh investors to finance some of its debts.

Alshech said the plan lacks in substance, consisting of nothing but vague, foggy general proposals.