Cash crisis for Maxwell family firms

Maxwell's children facing business meltdown
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The Independent Online

Exactly a decade after their father's death and the collapse of his publishing empire, Robert Maxwell's children are facing the prospect that their own businesses could become insolvent.

Telemonde, the telecoms group founded by Kevin Maxwell, has only four weeks to find $4m (£2.8m) to cover debts it admits it cannot pay. Meanwhile Commtech, the email business in which his elder sister Isabel has a leading role, says its continued survival is "not within our control".

Robert Maxwell fell off his yacht, the Lady Ghislaine, on 5 November 1991. His sons, Kevin and Ian, were unable to hold together the media empire, awash with debts and with a £400m hole in its pension fund, and the business was placed in administration a few weeks later. Kevin Maxwell was made bankrupt and both brothers faced fraud and theft charges, of which they were acquitted.

Ian Maxwell has disappeared from the limelight but Kevin returned in March 1998, heading Telemonde, a Nasdaq-listed group in which Larry Trachtenberg, one of his father's lieutenants, was also a senior director.

Telemonde has run up losses of $93.2m in three and a half years and owes banks and creditors some $61.6m. In its most recent regulatory filing it said: "Cash from operations may be insufficient to meet the principle and interest due on our debts ... We have been unable to generate sufficient cash- flow to meet certain of our debt service requirements and have triggered events of default on those obligations."

The most pressing of these obligations is a $4m payment due to the US telecoms giant Global Crossing. Global Crossing has already restructured Telemonde's debts once. "I cannot speculate on what we will do if Telemonde defaults on this payment," said a spokesman.

Kevin Maxwell would not return calls on Telemonde's financial position. He is understood to have agreed to a 75 per cent pay cut to £60,000 a year because of the group's financial problems.

Meanwhile CommTouch, the technology group based in Israel and the US, which Isabel Maxwell helped found with Gideon Mantel, is also facing collapse. Ms Maxwell, who is now president emeritus of the US operation, is said to have persuaded Paul Allen, founder of Microsoft, to back the business.

Mr Mantel admitted last week that CommTouch was in danger of running out of money. In a statement he said the group had just $5.4m of cash left and was cutting another 40 jobs. The group once employed over 500 people and now has just 75.

Mr Mantel added: "The company should have sufficient cash to continue operations. However, the success of our plan is predicated on the implementation of additional cost reduction programmes, retention of existing customers and renegotiation of existing contractual obligations. Some of these factors are not within our control. We will continue to seek additional financing or other strategic alternatives."