Toymaker Brio wards off bankruptcy

Swedish wooden toy maker Brio announced on Wednesday that it had proposed a financial restructuring to ward off bankruptcy.

• Toymaker Brio facing financial train wreck (17 Feb 09)

"After consultation with Brio's principal owners and major creditors, the board can now present a proposal for financial reconstruction," the company said in a statement.

According to the proposal, Brio's shareholder equity would be strengthened by around 314 million kronor ($36 million), while its liquidity would be boosted by at least 175 million kronor.

The company said it would meet the target partly through the issuance of preference shares at 2.20 kronor per share, "which has a considerable dilution effect for existing shareholders."

"Shareholders holding 78 percent of the shares and 96 percent of the votes in Brio have declared their intention to vote in favour of the board's proposal," the company said, adding that the new share issue would be discussed at its annual general meeting on April 27.

The Swedish company also said it planned to refocus on its northern European markets and that its business would be split into separate entities - Brio Toy, encompassing its traditional wooden toy market, and Brio Baby, covering baby articles like strollers, cribs and car seats.

Wednesday's announcement came after the company, which for the past decade has struggled with significant structural problems, cautioned last month it would "shortly face an acute liquidity shortage" and would rapidly need "a capital injection of a minimum of 300 million kronor."

The company, which is majority owned by the Swedish investment fund Proventus, replaced its chief executive at the beginning of January after laying off 30 of its 400 employees at the end of last year.