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Tandon in Nose-Dive Toward Chapter 11 : Bankruptcy: Newly renamed TSL Holdings, the Moorpark computer maker is now flirting for the third time with financial insolvency.


It appears Jugi Tandon is finally meeting his match. The chairman and founder of Tandon Corp. in Moorpark is renowned for having twice pulled his company from the brink of disaster during the 1980s. But now the manufacturer of personal computers is sinking for the third time, and sinking so fast that the company could soon be forced to file for bankruptcy.

In one ominous sign of his latest setback, Tandon has even taken his name off the company's stationery. Last month, the company changed its name to TSL Holdings Inc., although one of TSL's board members said he doesn't know what the initials stand for.

What is clear is that TSL, which sells most of its PCs in Europe, has eliminated nearly all of its U.S. operations and work force. TSL cut back because it's quickly running out of cash, leaving it unable to pay its bills. As of Sept. 30, the company owed more than $70 million to its suppliers, distributors and others. It had only $10 million in cash on hand.

TSL makes relatively low-cost PCs, but the company--and several other PC makers, for that matter--has been battered over the past two years by a price-cutting war in the PC market. Indeed, another PC maker, Everex Systems Inc. of Fremont, Calif., filed for Chapter 11 last week.

The price war escalated sharply last summer, when PC powerhouse Compaq Computer Corp. aggressively shaved its prices, prompting other major players to follow suit. That effectively eliminated much of TSL's appeal as a lower-cost alternative to those machines, and eroded its profit margins as well.

TSL will meet with its creditors later this month in a last-ditch effort to devise a debt-restructuring plan and avoid filing for Chapter 11 bankruptcy protection. But there's no guarantee about the meeting's outcome.

(Under Chapter 11, a company tries to develop a restructuring program under the supervision of the court to repay its debts, which in turn allows the company to keep operating without the threat of lawsuits by creditors.)

Tandon, a U.S.-educated native of India whose formal name is Sirjang Lal Tandon, was said to be out of the country and unavailable to elaborate on TSL's status. TSL's No. 2 man, Executive Vice President Ranjit Sitlani, declined to comment.

An outside TSL director, Robert P. Dilworth, declined to identify the company's major creditors except to say they include makers of data-storage drives, semiconductors and other primary computer components. He added that the creditors are hoping TSL can stay out of U.S. Bankruptcy Court.

"Most of the trade would be anxious to work something out," Dilworth said. "You've got a company that's been struggling but that still has fairly substantial pieces of business."

But TSL's earlier efforts to harbor cash by extending payments to certain of its suppliers and customers hasn't always succeeded.

In its third-quarter 1992 report to the Securities and Exchange Commission, TSL said its inability to reach new terms with certain suppliers resulted in "shortages in parts and components which have, in turn, caused production delays, manufacturing inefficiencies and lost sales."

TSL did not escape the price-cutting by being mainly a European player, where it ranks about 12th in size among PC makers with between 2% and 2.5% of the market, according to the research firm International Data Corp. "The price wars in general are going on over there as well," said Paul Nesdore, an international analyst for IDC.

The result: TSL lost $48 million on sales of $461.4 million in 1991, and lost an additional $42.3 million in the first nine months of 1992, on a 19% drop in sales to $249.5 million.

With its sales and margins narrowing, TSL rapidly consumed more of its cash reserves, leaving the company unable to adequately pay its debts.

Its biggest debt headache is its "trade accounts payable," its bills due within the next 12 months to its trade creditors. That debt as of Sept. 30 totaled $72.9 million, yet TSL's cash reserves as of then amounted to only $10.2 million, down from $27.6 million nine months earlier.

In an apparent illustration of that cash crunch, a Scottish company named EECO Ltd. sued TSL in federal court in Los Angeles two months ago, alleging that TSL failed to make full payment on a $1.5-million order for a shipment of computer keyboards. EECO is seeking nearly $500,000 in the suit. TSL has denied any wrongdoing.

Regardless, TSL's sliding fortunes are clearly marked by its stock price. The shares, which climbed as high as $35 apiece in 1983, now trade on the NASDAQ market for the price of a cup of coffee. The drop has hurt no one more than Tandon, 50, whose 8% stake in the company is currently worth about $1.5 million. A decade ago, his holdings were worth 100 times that amount.

However, he still received $402,000 in compensation in 1991, the most recent year for which TSL's proxy statement is available.

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