Racket Company Faces Bankruptcy After ‘Borg Effect’ Fizzles
BRUSSELS, Belgium (AP) _ Donnay SA rose to top seed among the world’s tennis racket makers when Bjorn Borg wielded its ware, but as the Swedish champion’s career faded, so did the company’s fortunes.
Those close to the Belgian firm said Thursday that family-owned Donnay’s debts have mushroomed to $35 million, and there is little hope of reaching an accord with creditors to avoid bankruptcy.
″We do not see how we can survive any longer in the current financial situation,″ Donnay managing director Ile Mioc told the daily De Standaard.
Donnay’s creditors refuse to provide fresh capital unless the firm, which has subsidiaries in the United States, Hong Kong, Brazil and Switzerland, comes up with a acceptable restructuring plan, said Fabrice Jacquemart, a spokesman for the government of Wallonia, in southern Belgium.
The Donnay family still controls 55 percent of the firm, with Wallonia and the Belgian government owning the remainder.
″The most likely solution is a takeover after the bankruptcy,″ Jacquemart said.
Donnay was founded in 1910 as a family business with six workers making wooden tool handles. It was decades later, after Donnay signed a promotion contract with a little-known Swedish rookie, that the company skyrockted to prominence.
Borg went on to reap five consecutive Wimbledon titles and dominated the sport in the late 1970s and early 1980s, and Donnay followed his fortunes, making over 1.5 million rackets a year and employing a staff of 600.
″Borg was such a piece of luck to them,″ said Jacquemart. ″They were nowhere near what they were once they had him.″
But Donnay’s success began to fade when the Swede retired in 1981.
Borg left mid-way through a five-year, $5 million contract with Donnay, depriving the firm of its main advertising outlet. ″It all went downhill from there,″ said Jacquemart.
Donnay, which also makes sports wear, never managed to attract another leading player to promote its products. ″They did not have the negotiating skills to catch another big contract,″ said Jacquemart.
The company’s problems were exacerbated by a management that had difficulty adapting to Donnay’s new international market position as well as keeping pace with the latest tennis technology.
Tennis players were shifting from wooden rackets to synthetic materials, and Donnay all but missed out on the revolution.
″They did not know what was happening. With their weak management capabilities they did not fathom the importance of the technology change,″ said Jacquemart.
Finally, in 1986, Donnay stopped making the wooden rackets that had accounted for two-thirds of its sales just five years earlier.
Donnay’s output fell to 800,000 rackets a year, its staff was cut to 350, and last year the company lost $2.23 million. Donnay’s share of the world racket market now amounts to a mere 10 percent.
Despite its flagging fortunes, money was a problem. Because of the once- famous Donnay name, banks continued to provide the company with millions of dollars worth of credit.
With debts piling up, it is unlikely a takeover candidate will surface before Donnay is declared bankrupt.
″There will be a lot more candidates when there is a bankruptcy,″ Jacquemart said.