As irate employees demonstrated outside Kika's Netanya store demanding unpaid wages, the Israeli franchise of the Austrian furniture and housewares chain filed an urgent request for protection from creditors on Thursday afternoon. Kika's owners asked the court for a stay of proceedings to give them time to reach an agreement with creditors, to whom they owe the enormous debt of NIS 177 million.
At the same time, a number of Kika employees, who have yet to be paid their April salaries, filed a separate request to appoint a temporary receiver for the company. They also fear they will not be paid for their May work either.
Thursday morning, about 100 Kika employees arrived at the international furniture retailers' sole store in Israel and found it locked with guards barring them entrance. Workers continued to protest throughout the day and into the night, though management cut off the lights in the parking lot where they protested.
The store opened in 2011 to massive media fanfare, but has been unsuccessful in drawing in Israeli shoppers, leading to massive losses and debt.
Kika owes Bank Leumi NIS 27.1 million and Bank Hapoalim NIS 42.7 million. Employees are owed NIS 1.8 million and suppliers NIS 30 million. Kika customers are owed NIS 4 million as the company does not plan on supplying them with their merchandise.
Kika also said in its court filing that it owes its owners NIS 72 million, of which NIS 47 million is owed to Ashtrom Properties.
Ashtrom, which owns 15% of Kika in Israel, lent the store NIS 30 million. The banks are currently withholding the company's credit card income after their demands for immediate repayment of debt were not met. Businessman Solomon Batito owns the other 85% of Kika.
Tzvika Goldberg the company's CEO said Thursday morning: "In the next few hours the company will file for bankruptcy protection. In addition, efforts are being taken to payout the employees, who are very dear to me, their salaries for last month. I hope that a solution will be found that will allow us to reopen the store, hopefully by next week."
Employees did manage to meet with a senior executive Thursday afternoon, but he told them that management had also not received their April wages, though he promised to try to pay the salaries by the beginning of next week.
Over half of the 240 store employees joined the Histadrut labor federation, making it the legal employee representative. It started an action committee to deal with the crisis.
"I have no money left to start the month with," Yafa Sadeh, an employee in the textile department, said. "I'm recovering from a car accident, and didn't get paid. I want to work - not to sit at home. We don't want welfare - I want a place to go to in the morning."
Senior company employees said that some 3,000 customers who already paid Kika for its products in full are waiting for them to be supplied. An additional 2,000 paid 35% in advance. At this time it is unclear if they will ever receive their products.
Kika's problems are nothing new. Israelis who visited the Kika store apparently expected a rival to the popular Ikea chain, but instead of the low prices of the Swedish company they found a giant store that offered a range of prices in all categories. Kika customers also complained of supply delays and difficulties with customer service.
Ashtrom reported in its 2011 financial report that Kika ended 2011 with revenues of NIS 27.3 million and a loss of NIS 44.5 million. It lost NIS 13.5 million in 2010, and its accountants had attached a "going concern" warning to Kika's reports, saying there was a real possibility it would go bankrupt.