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Icelandic retail investor Baugur, which has stakes in British high street stores including French Connection, House of Fraser and Debenhams, said Wednesday it had applied for bankruptcy protection.
The decision came after the company said last week it would close its Reykjavik head office, laying off all 15 employees there, and would cut its administrative staff in Britain from 29 to 16 employees. "This morning (Wednesday), Baugur Group ... and a number of its wholly owned subsidiaries ... have applied to the District Court in Reykjavik to enter into the moratorium process," the company said in a statement.
"This action has been taken in order to protect the group's assets as well as the interests of all creditors," it said, adding it had made the move after restructuring efforts collapsed. Companies in which Baugur has investments employ 50,000 people worldwide, and include British toy store Hamleys, frozen food retailer Iceland, fashion label All Saints as well as clothing stores Oasis, Principles and Warehouse. In December, the heads of Baugur were charged with tax evasion amounting to 2.4 million dollars (1.9 million euros) from 1998 to 2003.
The December charges marked the third time since 2002 that they and the company had been pursued by Icelandic authorities on suspicion of embezzlement as well as accounting irregularities, although many of the charges had previously been thrown out by the Supreme Court.
Baugur's burgeoning headaches come as Iceland struggles to dig itself out of a deep economic crisis after its once-booming financial sector crumbled last October. The government was forced to nationalise the major banks as the currency nosedived. One of the nationalised banks, Landsbanki, which owns most of Baugur's Icelandic debt and had been tasked with helping it restructure its finances, said Wednesday the efforts had failed.
That decision could push the Icelandic company to sell off assets at a time when market conditions are difficult, with shares trading at multi-year lows in Europe. "This is a kick in the balls from Landsbanki and the result will be that the Brits will get some of the best companies owned by Icelanders at a very cheap price," Baugur chief Jon Asgeir Johannesson told news website visir.is.
"I am sure that Philip Green is now dancing in his living room because he will get many of our companies for next to nothing," he said, referring to a British tycoon who late last year began purchasing most of Baugur's debt. House of Fraser said in a statement that while its board "sympathises" with Baugur's situation, the retail investor is "a minority shareholder and has no impact on the strength of the business, or its day to day operations," it said.
"House of Fraser has a good relationship with both its banks and suppliers and has continuously reduced debt ahead of schedule." House of Fraser chairman Don McCarthy called it "sad news" but added: "The difficulties that Baugur faces do not affect House of Fraser's trading or banking position. It is business as usual."
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