5th Avenue Products Trading GmbH, the distributor of Cuban cigars in Austria, Germany and Poland, has formally entered insolvency proceedings, halfwheel reported on November 3. On November 1, the Waldshut-Tiengen District Court formally opened the proceedings, and Dr. André Berbuer of BSK Berbuer Speier Kuhn has been appointed as the insolvency administrator. Berbuer had already been involved in the insolvency request filed in September, when the distributor announced it could no longer fulfill orders for customers.
In a four-page document for the media, Berbuer outlines a striking situation. First, 5th Avenue is not broke: it has both money and cigars, but recent European Union sanctions have prevented it from doing much of any business. Second, the EU sanctions on Chen Zhi are, in the letter’s words, the “sole” cause of the situation — Chen owns 28.55 percent of Habanos S.A. and is believed to own around 15 percent of 5th Avenue, whose cigars he therefore partly owns through every Cuban cigar distributor. Third, 5th Avenue is not accused of any wrongdoing: the sanctions are unrelated to the cigar business, and Chen was not an active owner of the company. Finally, the company is using insolvency to find a way to operate: German law, Berbuer argues, has no framework for this kind of case, including what the letter calls “frozen tangible assets”; the proceedings have created a narrow pathway to pay employees, but the company is still functionally unable to do business and cannot operate under this system long-term.
The letter repeatedly mentions the 50 jobs affected at 5th Avenue, and notes that German retailers across the country have been greatly affected because they cannot get Cuban cigars to sell, with hundreds of jobs in the German cigar sector at risk and tax revenue lost to the government. It offers no specific path forward or timeline. According to Habanos S.A., Germany is one of the top five markets for Cuban cigars. Photo: Cigar Aficionado, from its coverage of this story.
Source: halfwheel
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