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UPDATE 4-Baugur's demise puts UK retail assets in play
February 4, 2009 / 10:53 AM / in 9 years

UPDATE 4-Baugur's demise puts UK retail assets in play

* Baugur applies for creditor protection

* Landsbanki seeks to put Baugur UK unit into administration

* Philip Green seen as suitor for some Baugur assets

* Alchemy confirms interest in some Baugur assets

(Adds Landsbanki statement)

By James Davey

LONDON, Feb 4 (Reuters) - Baugur, the Icelandic group which stormed onto the global financial stage by snatching stakes in high profile British retailers, has applied for court protection from creditors after restructuring talks with lenders failed.

The main lender, Landsbanki, said separately it had applied to put Baugur’s UK arm into administration, fuelling speculation its interests in companies ranging from toy store Hamleys and supermarket chain Iceland to department stores group House of Fraser might be sold at knock-down prices.

British retail entrepreneur Philip Green has previously said he would be interested in some of Baugur’s businesses, which also include fashion retailers Jane Norman and Whistles, while private equity firm Alchemy told Reuters on Wednesday that it was interested in some of the assets. [ID:nL4359517]

Baugur’s aggressive expansion earlier this decade symbolised Iceland’s rapid economic growth, but the tiny north Atlantic island was swept up in the global credit crisis last year, which brought down banks like Landsbanki and its internet arm Icesave.

“This morning Baugur ... (has) applied to the District Court in Reykjavik to enter into the moratorium process. This action has been taken in order to protect the group’s assets as well as the interests of all creditors,” Baugur, which has stakes in companies employing about 50,000 people, said in a statement.

“The board of the company unanimously resolved to take this action following yesterday’s decision by Landsbanki to discontinue discussions regarding a potential restructuring of the group.”

If granted in a court hearing on Friday, the moratorium is expected to give Baugur three weeks of protection from creditors, though this can be extended. A supervisor would be appointed by the court to negotiate with creditors.

FIRE SALE?

Baugur, with over 1 billion pounds ($1.4 billion) of debt, had wanted to reach a deal with its lenders to avoid a break-up.

It had been in talks with Landsbanki, Glitnir and Kaupthing, now partially owned by the Icelandic government, about a new financial structure.

Landsbanki said the talks had not produced acceptable plans and it had filed a petition to appoint PricewaterhouseCoopers as administrators to Baugur’s UK arm, BG Holding ehf.

Landsbanki said the move did not affect the trading of the UK unit’s investments and some of the companies involved, like House of Fraser, issued statements to confirm this.

However, analysts said the move was likely to lead to the sale of the investments, which also include stakes in department stores group Debenhams (DEB.L) and fashion group French Connection (FCCN.L).

“One option is that they (the shareholdings) will revert [to the banks], the other is that they will be sold off to generate cash, which will then go back into the business for the benefit of creditors,” said Altium Securities analyst David Stoddart.

Baugur Chairman Jon Asgeir Johannesson said seeking the moratorium was the only way for the group to protect the interests of its companies and creditors.

“I‘m sure that Philip Green is dancing a war dance in his living room, because now he will become a large owner of our companies for virtually nothing,” he told Icelandic news website Visir.is.

“Landsbanki didn’t give us any other options,” he added.

Green, the billionaire owner of Bhs and the Arcadia fashion group who tried and failed to buy Baugur’s debt last year in a bid to gain control of its retail assets, declined to comment.

Baugur, whose interests also include a 49 percent stake in Mosaic Fashions, which owns chains such as Oasis, Principles, Karen Millen and Warehouse, was delisted from the Iceland stock exchange in 2003 after it was bought by the Mundur holding company, whose owners included Baugur’s management.

Nick Hood, partner at insolvency experts Begbies Traynor, said Baugur’s move to seek court protection could be viewed as a positive for the businesses concerned.

“This could potentially be good news for Baugur’s retail investments, which have been grappling with the uncertainty of having a significant but unstable shareholder, if more solid investors such as private equity houses are willing to pick up its stakes,” he said. (Additional reporting by Omar R Valdimarsson, Simon Meads and Mark Potter, editing by Will Waterman and Elaine Hardcastle)

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