Iceland chief executive Malcolm Walker this week wrote to suppliers to reassure them that the banking crisis in the country of Iceland will have no impact on his business.
Walker, in whose business Baugur is a minority shareholder, wrote: “A number of our suppliers have contacted us to express concern about the “goings-on” in Iceland (the country) and to enquire about any possible impact that may have on us. In other words – is there a problem and are we good for the cash?”
He went on: “Iceland (the company) is trading astonishingly well, with like-for-like sales running at over 14 per cent for the year to date and over 17 per cent in recent weeks. We are a highly cash-generative business.”
He continued: “As at last night, we had£180 million in cash on deposit spread over several UK banks and none with the Icelandic banks.”
The letter explained that “all the major credit insurers are very happy with our performance and continue to maintain full cover”.
He pointed out that the grocer is in contact with all the major credit insurers on a regular basis and for the past three years has sent them its management accounts each month.
Walker also said in the letter that he has a good working relationship with Baugur and “the future of our own company as a trading entity will be unaffected by anything that might happen to the ownership structure”.
Walker’s action mirrored that of Baugur-backed department store chain House of Fraser, which last week wrote to suppliers to reassure them that its business is robust.
House of Fraser chairman Don McCarthy told suppliers that the economic crisis in Iceland and any impact this may have on Baugur has no effect on the department store chain.
McCarthy added that the relationship between Baugur and House of Fraser is “solely that of a supportive shareholder”.
Kaupthing's key role
The future of Icelandic bank Kaupthing will be key to any changes to shareholdings and finances at Baugur-backed businesses.
Kaupthing has minority investments in, or has provided backing for, Baugur-backed businesses including Mosaic and Jane Norman.
There was speculation that Kaupthing would sell overseas assets and tighten lending conditions. “It’s out of Baugur’s hands,” said one industry source.
This week Kaupthing called in a loan to Robert Tchenguiz, forcing him to sell his stake in Mitchells & Butlers. Tchenguiz also reportedly put his Sainsbury’s stake up for sale. Baugur boss Gunnar Sigurdsson claimed the Icelandic banking crisis would not affect Baugur.
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