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Baugur Goes Bust

Feeling the effects of the economic implosion in Iceland, the country’s largest corporation, Baugur Group hf., has asked for bankruptcy protection from creditors after restructuring efforts fell apart Wednesday.

The company started in the late 80’s as a father-son discount supermarket chain, Bónus, which quickly expanded and dominated the Icelandic retail grocery market. Company head Jón Ásgier Jóhannesson embarked on a modern-day viking raid at the start of this decade, buying most of the British High Street and employing some 50,000 people outside of Iceland.

That high-end conquest was fueled by an enormous amount of debt, generously loaned out to him by the Icelandic banks, one of which he was a partial owner. UK paper The Guardian has said Baugur has about 1 billion pounds ($1.4 billion) of debt.

“This was the only way for us to protect the interests of our company and other lenders. Landsbanki did not give us any other option,” Jóhannesson told reporters. “This is a blow below the belt from Landsbankí.”

Jóhannesson also expressed concern that “British vultures” would swoop in on Baugur’s assets, which would be available at fire sales prices. Turnaround specialist Alchemy partners has expressed interest in House of Frasier and jewelry chain Goldsmith’s.

“I’m sure that [UK retail billionaire and main Baugur rival] 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,” said Jóhannesson. Green said he spoke with the company in October about buying up their debt. “I haven’t been offered anything,” said Sir Philip. “We are looking at lots of different opportunities. Should we be offered a business or businesses we will look at them in the normal way and we have finance available to buy things.”

The impact on the British High Street will hardly been seen, say experts, noting many of the stores owned by Baugur had a very good holiday season. “It is a shock for the high street but I am not sure all that much will change. Undoubtedly there will be some fall out and it is questionable that all the businesses will remain by the end of the year, but some of the chains are in very good shape,” said Mintel retail analyst Richard Perks.