A report on the financial situation of the troubled pearl factory Majórica shows that the past three years have had negative results but the company continues to present a balanced report and has sufficient assets in circulation to cover short term debts. The report was commissioned by the CC.OO (Workers Commissions) union and shows that an operation carried out in 1998 was “irregular” as it involved a loan by shareholders at 15 per cent payable annually, when they are not allowed to make such loans. The report concludes that the company's problems can be summarised in four main points:
1. The liabilities of Majórica SA come basically from the liability generated by the new shareholders when the shares of the former Majórica SA and Perlas de Manacor SA were acquired.

2. Accumulated results of 483 million pesetas in the last three years are negatively affected by financial costs (2'265 million pesetas in three years) which the company has had to bear as a result of its purchase of the shares.

3. The cash flow generated in the last three years, which came to 2'897 million pesetas, has been used mainly to pay debt and financial costs.
4. The operations of buying shares by debt, fusion and change of name have led to two entities, Majórica SA and Perlas de Manacor SA, going from a healthy financial situation to a delicate one.

Majórica SA was formed under the name of Inversiones en Perlas de Mallorca SA in April 1998 with a share capital of 503.3 million pesetas. The following day, the capital was expanded by 496.7 million pesetas, making a fully subscribed and paid up 1'000 million pesetas. That same day the company obtained a loan of 7'000 million pesetas from BCCH and 2'000 million pesetas from the shareholders at 15 per cent. The following day the company acquired all the shares of Majórica SA and Perlas de Manacor SA for an initial sum of 9'936 million pesetas, plus an additional amount which would be obtained by the sale of the building in Barcelona's Avenida Diagonal, once expenses and a 150 million pesetas mortgage were cleared.


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