Baugur’s collapse signals the end of one of retail’s most colourful investors. Our new regular column explains what its demise means for the retail scene.
Why did Baugur file for bankruptcy?
An Icelandic court rejected Baugur’s application to extend its moratorium process, effectively ending its protection from remaining creditors.
What caused Baugur to hit the buffers?
The unravelling of Baugur’s empire – which comprised 3,800 stores with a£10bn turnover – followed the collapse of the Icelandic banking system in October last year. Highly leveraged Baugur had stakes in, and was backed by, the banks, so its£1bn of debt became unviable. Banks Glitnir, Landsbanki and Kaupthing were nationalised and the Icelandic government seized control of their assets.
How did that affect Baugur’s UK retail stakes?
In February, Landsbanki pulled the plug on funding to Baugur’s UK arm BG Holding (Retail Week Online, February 4), forcing it into administration. The administrators to Landsbanki now control Baugur’s stakes in Hamleys, House of Fraser, Iceland and Aurum. Kaupthing also forced fashion group Mosaic into a pre-pack administration after swallowing Baugur’s equity and the group was unable to pay back its£400m debt. The result was the creation of Aurora, which comprises Karen Millen, Coast, Oasis and Warehouse, following the sale of Shoe Studio to Dune and Principles’ stock to Debenhams.
Landsbanki and Kaupthing have both stated that they intend to retain their stakes until the market returns.
What does Baugur’s bankruptcy mean for its remaining retail stakes?
The stakes are now held by administrators to the Icelandic banks and the Icelandic government. Financial restructuring including management buyouts or debt-for-equity swaps have been mooted at Whistles, Jane Norman and All Saints. Control of Baugur’s stakes in public retailers – which have included French Connection, Debenhams, Woolworths and Moss Bros – via its co-owned Unity investment vehicle remains unclear.
What’s next for the Baugur directors?
Founder Jón sgeir Jóhannesson (pictured) and directors Gunnar Sigurdsson and Don McCarthy have created a company called Tecamol (Retail Week, last week) as a retail consultancy and acquisition vehicle.
It is unclear how Tecamol will raise funds to make acquisitions or if it wants to buy back former Baugur stakes.
McCarthy told Retail Week: “We want to move on. We will watch the market and wait.”