future, helped by e-commerce It was almost a year ago that the first cracks in Staples Holdings Ltd began to appear.

A few months later almost 300 shareholders who had invested $5 million in the office supplies company, were told the money was gone -- and they would get nothing back.

Customers and shareholders alike were horrified to learn the company owed millions of dollars.

Creditors lined up to see if they could get any money back. Shareholders hoped against hope that some money would be left over for them, or that a mistake had been made and they would get their money back.

A year on, a team of liquidators are still looking into exactly what happened to the company and it will be January before they finish their work.

Then they can shed light on why what looked like a promising company took an almighty nose-dive into bankruptcy.

Staples Holdings Ltd was put on the stock market in May 1995 amid much hype and the shares were touted about town as a great buy.

The idea was to create the largest office equipment and supplies business on the Island by merging with Chips.

With preferred shareholders promised a 10 percent dividend, residents scrambled to get a piece of the pie.

Some $5.25 million was raised through stocks, and a new bank loan of $1.9 million was taken out.

Together these funds -- $7.4 million -- were used to buy out Chips Ltd, a company which had the Sharp dealership on the Island and an enormous customer base.

And while the newly formed public company Staples Holdings Ltd. struggled to merge Chips into its operations, it continued to pay out the 10 percent dividend to preferred shareholders.

According to Michael Johnson, president and CEO of Staples Ltd, over the next three and a half years debt service and the preferred dividends cost the company $4.4 million in total.

The company was not performing as well as the shares prospectus had promised and the pot of gold had run dry.

In November 1998 the company could no longer pay out the amounts it owed and trading in Staples Holdings Ltd. was suspended on the Bermuda Stock Exchange.

Back from the brink At the Annual General Meeting in February, preferred shareholders who had gathered were told just how bad the situation was. They had lost their money and the company was going under.

They were also told that Staples Holdings Ltd. would be selling the profitable stationary arm, Staples Ltd, and that funds from this would go to repay first the banks, then the creditors, then them, the preferred shareholders, and finally, the common shareholders.

But with the figures as they stood, it was unlikely, after the banks took back the money they were owed, that any money would be left for anyone else.

Employees at Staples Ltd did not know what would happen to them or their jobs.

They kept working, their future uncertain.

Then in July 1999 local businessman Fernance Perry came in on his white charger to save the stationary division. It is not known how much he paid for Staples Ltd, but last year that part of the company was estimated to be worth $2 million.

Now separated from the crisis-ridden Staples Holdings Ltd, Staples Ltd had to look to the future, its survival still not guaranteed.

With Mr. Perry and the banks, a three year plan was drawn up and creditors contacted.

And despite the crisis, six months later it was all systems go. Staples Ltd may still have had the same name as the holding company now in liquidation, but it began to re-build itself.

"We could not have achieved what we have achieved without the dedication of our employees, the support of our customers and help of our vendors,'' Mr.

Johnson said.

"We have come through what has been a difficult time for us all into a company that is thriving.'' Mr. Johnson said that the future now looks bright under new ownership.

"The new owners have invested cash in Staples Ltd. They took over the debt and debt-restructured. We have clear strategies to differentiate the business in all its key markets. The three-year business plan is based on credible numbers, financial imperatives and clear strategies.

"And the company is currently on-line for electronic transactions with two customers as a precursor to full business-to-business e-commerce.'' While Staples Ltd. continues re-building itself by investing in the tools of the future such as e-commerce, the shareholders of Staples Holdings Ltd are still left wondering what happened to their money.

According to Mr. Johnson, there is no great mystery as to where the cash went.

"The answer is very simple. It all went to buy Chips. The prospectus was, shall we say, over ambitious.

"There was nothing in the structure which allowed us to do anything other than by the book. It was a public company.

"It got the best legal and accounting advice.

The reason it did not work out was because it was a bad business decision.'' Meanwhile, shareholders and creditors alike will have to wait for the millennium for the official liquidators' report before they too will be able to move on to a new chapter in their lives.

Winning team: The Staples Ltd team have faced some hard times since Staples Holdings collapsed. But the workers have pulled through. From left, Kim Bell, customer care manager, who has been with the company for 17 years, Paul Fortuna, human resource manager, Wilena White, chief financial officer, Michael Johnson, president and chief executive officer, Bryan Simmons, office supplies manager, and Gilbert Hayward, technical supervisor.