Blog: Leonie BarrieCool chill from Iceland

Leonie Barrie | 30 September 2008

Icelandic financiers and banks, once welcomed for ploughing billions of pounds into the British economy through their investments in high street fashion retailers, are now casting a chill over the sector. And yesterday’s nationalisation of Glitnir, the country's third largest bank, shows just how closely events in one country are inextricably linked with another.

An immediate effect of Glitnir's collapse was that its major shareholder Stodir was forced to file for administration. Stodir, however, is controlled by entrepreneur Jon Asgeir Johanneson, who runs Baugur which, in turn, owns a string of retail names ranging from Karen Millen, Oasis and Warehouse to Shoe Studio, Principles and Coast. It also has stakes in Debenhams, Moss Bros and French Connection.

No-one yet knows what impact the collapse of Stodir will have on Baugur and its huge retail interests, although it seems inevitable that there will be some disruption. The cost of servicing the money borrowed to fund its acquisitions will have soared, of course, and it may be much harder now to tap credit markets for extra cash. All of which raise the question of whether or not it will have to put some of its retail interests up for sale.

Icelandic banks Kaupthing and Landsbanki are also thought to have invested substantially elsewhere on the high street – and as many retailers may well find it hard to track down additional funding in the run-up to what is likely to be an already tough Christmas.

One more immediate casualty of the Icelandic freeze is Savile Row fashion house Hardy Amies Plc, which is teetering on the brink of bankruptcy after failing to secure additional funding from its major investor – the Icelandic investment group Arev Brands Limited.

 

Baugur fashion chains caught in Icelandic bank bail-out?


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