Baugur’s fashion retail investments will continue to trade as normal following Baugur’s application for bankruptcy, which was prompted after Landsbanki bank terminated talks about a restructuring of the investment firm yesterday.
This morning Baugur applied to the district court in Reykjavik to enter into the moritorium process - the equivalent of Chapter 11 bankruptcy protection in the US.
Landsbanki said in a statement: “Our discussions with Baugur Group did not produce any acceptable proposals, so we have taken steps to protect these valuable assets. We intend to work with management of the companies to maximise the long-term value for all stakeholders. This move is designed to preserve the stability and protect the value of the companies concerned.”
Sources told Drapers that Baugur’s shareholdings in the firms were likely to revert to the banks involved. It is unclear whether there are cross guarantees in place allowing different banks to take over shares in firms they do not lend to.
Alternatively pre-emptive share rights could kick in and the majority shareholders in each business will be given first refusal to buy the shares.
Baugur has a 49% stake in Mosaic Fashions, which owns Oasis, Warehouse, Karen Millen and Coast. Mosaic Fashions said in a statement: “Following the announcement by Baugur Group, the board of Mosaic Fashions wishes to make it clear that the news of Baugur filing for a moratorium, will in no way affect the future strength of the group or the operations of the business. Baugur is a minority shareholder in Mosaic Fashions. The operating company is funded by Kaupthing bank, with whom discussions on long term funding are progressing satisfactorily.”
Baugur holds a 35% stake in House of Fraser. House of Fraser said in a statement: “House of Fraser was acquired by Highland Acquisitions in November 2006. The department store has been working with Baugur since then and the board sympathises with their current situation.”
“During these difficult times, it is important to clarify the independent of House of Fraser and the emphasise that Baugur is a minority shareholder and has no impact on the strength of the business or its day to day operations.”
All Saints is also not thought to be affected. Baugur has around 35% of the business. Entrepreneur Kevin Stanford is thought to be the majority shareholder in the young fashion chain.
Jane Norman chief executive Saj Shah said: “We are extremely sorry to hear the sad news about Baugur going into administration. This does however have no impact on Jane Norman’s operations or finance.”
Baugur has a 39.5% stake in Jane Norman.
Whistles chief executive Jane Shepherdson told Drapers this morning that the womenswear business was also unaffected. Baugur is believed to have recently pumped £500,000 into Whistles as part of a refinancing package.
It remains unclear what will happen to Baugur’s stakes in Matthew Williamson and Day Birger et Mikkelsen. However US investment firm TSM Capital is a significant shareholder in Matthew Williamson and could potentially takeover Baugur’s 26.6% of the business.