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Lernout & Hauspie files for Chapter 11

The troubled maker of voice recognition software files for bankruptcy protection as it seeks to reorganize its debt.

Lernout & Hauspie, the troubled maker of speech recognition software, filed for Chapter 11 bankruptcy protection Wednesday.

The Belgian company said it will continue operating as it seeks to reorganize its debt. L&H, which filed its U.S. bankruptcy petition in a Delaware court, also plans to file for reorganization in Belgium.

"We have tried, without success, to reach an acceptable accommodation with our bank lenders," chief executive John Duerden said in a statement. "After an intensive analysis of L&H's worldwide business operations and a careful assessment of its financial position, we concluded that a voluntary reorganization filing is both prudent and necessary to preserve and rebuild our valuable customer base and technology assets."

Daniel Hart, the company's general counsel, attributed the decision to the "recent discovery of a very significant cash shortfall on the balance sheet" of L&H's Korean subsidiary.

The company's troubles became public Aug. 8 when The Wall Street Journal reported that the company may have given incorrect financial information about its position in the Korean market, a charge the company disputed at the time.

In September, the U.S. Securities and Exchange Commission said it was opening an investigation into the company's books.

On Nov. 9, L&H said it would restate financial statements for the past three years and that company co-founders Jo Lernout and Pol Hauspie were stepping down. At the same time, the company said it expected third-quarter revenue to be at least $40 million below previous targets, which were in the range of $165 million to $185 million.

The Nasdaq halted trading Nov. 9, stating that trading would remain halted until the company "fully satisfied" its request for more information. At the time, shares were trading at $6.22, off about 91 percent from their 52-week high of $72.50.

Before its recent troubles, L&H had been on an acquisition spree. In March, L&H announced it would acquire well-known Dictaphone for about $936 million in stock and debt. The same month it announced a deal to acquire speech-recognition rival Dragon Systems in a stock deal valued at the time at about $593 million.