A Belgian court has granted Lernout & Hauspie (L&H) - the parent company of Dictaphone and Mac-speech software developer Dragon Systems - bankruptcy protection.
It was the second bid by L&H for concordat, the Belgian equivalent of bankruptcy protection. A court held a four-hour hearing behind closed doors in Leper, Belgium, on Wednesday to determine if protection would be granted.
An L&H spokesman said: "We've been given concordat on a six-month provisional basis. During this period, we believe we can develop a recovery plan. That is all I can confirm at this moment." L&H plans to announce further details of the decision today, he added.
Payment freeze Under bankruptcy protection, L&H can withhold payments for six months on a $400 million loan as it comes up with a plan for repayment. L&H received the loan last May to help it acquire Dictaphone. This loan was backed by a consortium of five banks, including German giant Deutsche Bank.
The original application was rejected on the grounds that L&H had failed to present sufficient detail concerning how it would proceed after winning protection from creditors. The banks had originally requested that L&H be granted just two months concordat protection.
World-wide troubles In the US, L&H already operates under Chapter 11 of the US bankruptcy law, and earlier this month, a Belgian judge appointed three officials to guard the company's assets, a measure requested by a number of Belgian L&H shareholders.
The company is also facing a separate investigation into fraud, ordered by a Belgian court in December, as well as an investigation by the US Securities and Exchange Commission. The enquiries relate to alleged improper practices in relation to Asian subsidiaries. Specifically, the commission is looking into charges that $100 million is missing from the coffers of the L&H South Korea unit.