Baugur has confirmed that it has filed for protection from its creditors in the Icelandic equivalent of Chapter 11 bankruptcy protection as exclusively revealed by Retail Week this morning.
Icelandic bank Landsbanki has pulled funding to the Icelandic investor which controls or owns stakes in UK retailers including House of Fraser, Hamleys, Iceland, Mosaic and Mappin & Webb.
In a statement Baugur said: "This morning Baugur Group and a number of its wholly owned subsidiaries including BG Holding ehf, have 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.
"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.”
Sources close to Baugur-backed retail businesses said that the move would not affect the day-to-day running of the retail business. However, it is understood that it could prompt changes in ownership and control at some retailers.
Baugur's stakes in the retailers could also revert to the banks which control the investor's debt. In some cases pre-emptive share rights will allow majority shareholders in businesses first refusal to buy back the shares.
Control of Baugur's assets fell in to the hands of the administrators to Iceland's banks after the collapse of the country's banking system in October.
Since then, Baugur has been in talks with creditors to banks Kaupthing, Landsbanki and Glitnir about whether they will sell their assets or support debtors such as Baugur.