L&H bailout decision due Thursday

Embattled Belgian software company Lernout & Hauspie Speech Products NV (L&H) will learn Thursday if it can go ahead with a US$60 million rescue financing agreement with Ableco Finance LLC, a New York lender specializing in making secured loans to troubled or bankrupt companies.

The bankruptcy court in Camden, New Jersey, is expected to rule then on whether the deal can proceed. One third of the $60 million is earmarked to pay off General Electric Capital Corp.’s bridge loan to L&H offered late last year. The remainder will fund L&H operations, according to a source close to the financing deal who requested anonymity.

L&H declined to comment on the court hearing and on the finance package itself. However, the source said Abelco’s terms are “a lot better than those offered by GE Capital.”

GE Capital confirmed that it provided a loan of up to about $20 million, but didn’t say how much of it has been used by L&H until now.

Ableco’s terms are reported to include first refusal on any L&H assets in case of bankruptcy, fees totalling about $1.5 million, interest charges of 9.5 percent on the financing and first position in the line of creditors waiting to be repaid by the ailing firm.

Ableco’s loan is also contingent upon due diligence, which it must complete by Feb. 7, the source said.

L&H filed for bankruptcy in Belgium and the United States last fall. It is also under investigation on both sides of the Atlantic following revelations of a $100 million cash shortfall from the company’s Korean unit, and questionable accounting practices companywide.

A new chief executive — the third in six months — was appointed last week. Philippe Bodson was chosen as much for his U.S. financial contacts as for his proven track record as a manager, according to financial analysts in Brussels.

Lernout & Hauspie, with dual headquarters in Ieper, Belgium and Burlington, Massachusetts, can be reached at +32-57-228-888, or http://www.lhsl.com/.

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