Gory scenes tend to loom large in Icelandic sagas and the financial story unfolding there is proving no exception. The question is, will UK retail feature in one of its bloodier chapters?

The volcanic island’s economy was showered by the lava of global financial meltdown on Monday, leading to the nationalisation of the Glitnir bank. Glitnir was a trusty oarsman on Icelandic investor Baugur’s longship, ready to help with financing when the Norse raiders targeted British retailers such as House of Fraser or Moss Bros.

Glitnir’s biggest investor was Stodir, which subsequently filed for administration. Stodir is controlled by Jón sgeir Jóhannesson, chairman of Baugur. At the time it hit trouble, Stodir was about to buy a 39 per cent stake in Baugur. So it’s no surprise that events are being scrutinised for any likely impact on Baugur’s portfolio – which includes high street names such as Hamleys, Oasis and Iceland.

At present, there appears to have been very little effect. Baugur has loans with Glitnir, but Glitnir will continue to operate as normal, the Icelandic central bank has assured. Stodir’s demise will theoretically not affect Baugur – the two are separate and their planned arrangement was simply a way of structuring Jóhannesson’s investment interests.

True as all that may be, it’s hard to credit – forgive the pun – that there will be no aftershock from Iceland’s convulsions on the UK high street. Will Stodir’s misfortunes prompt Jóhannesson to separately conduct a sale of parts of his retail empire? And what is the outlook for future deals? Glitnir was on stand-by to finance the abortive Moss Bros takeover, but Baugur is understood to be interested in Woolworths. Given wider credit conditions and lack of appetite for retailers, deals must be off the agenda.

The fact that Baugur’s investment interests are outside Iceland distances day-to-day businesses from the country’s financial turmoil. However, Baugur’s deals have mainly been debt-financed and the servicing costs are likely to have gone up. That could put more pressure on Baugur’s existing retail interests. Baugur’s position is not helped by its investments in quoted companies, which have plummeted. Woolworths, Debenhams and French Connection have not yet brought anything like the sort of returns hoped for.

Iceland seems to be in reindeer doo-doo up to the antlers. Baugur insists it is focused on business as usual – but you get the feeling there will be twists and turns in this saga yet.

George MacDonald is deputy editor of Retail Week

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