The representatives of Icelandic investment company Baugur Group requested it to be taken into bankruptcy proceedings yesterday after losing their case for extended moratorium on its payments at the Reykjavík District Court.
Former chairman of Baugur Group Jón Ásgeir Jóhannesson. Photo by Páll Stefánsson.
The court’s ruling states that Baugur’s plans to reorganize the company were not realistic and not likely to provide a solution to its financial problems, visir.is reports.
The court agreed to arguments provided by the resolution committee of old Glitnir and the new state-run Íslandsbanki (formerly Glitnir), who demanded that the company would not be granted an extension to the moratorium on its payments but rather declared bankrupt. The ruling cannot be appealed to the Supreme Court.
The ruling stated that Baugur’s debts in excess to assets were ISK 148 billion (USD 1.3 billion, EUR 1.0 billion) last January. Baugur owes Íslandsbanki almost ISK 6 billion (USD 54 million, EUR 42 million) and Glitnir ISK 42 billion (USD 377 million, EUR 295 million).
Kristín Jóhannesdóttir, who recently replaced her brother Jón Ásgeir Jóhannesson as Baugur chairman, released a statement, which said, “the conclusion of the Reykjavík District Court [yesterday] is a huge disappointment for us at Baugur.” The statement was published on dv.is.
“We believe Baugur fulfils all conditions on continued moratorium on its payments and that plans for financial reorganization were realistic. […] The executives and employees of Baugur have worked hard on saving the company’s assets in cooperation with its claimants ever since last fall when Iceland’s banking system collapsed following the credit crunch,” the statement continues.
“We believe that we were close to reaching an agreement, which could have proven beneficial for all. But now we’ve reached the end of the road and in light of the changes that inevitably will take place, the board of Baugur would like to thank its employees and others that Baugur has interacted with for their good cooperation in the past years,” Jóhannesdóttir concluded in her statement.
Jóhannesson, who is abroad, told visir.is that he feels terrible about this conclusion and that he was certain the board of Baugur had provided a much better solution to protect the value of its assets.
Jóhannesson added that Baugur’s bankruptcy will affect neither Hagar, which operates the Bónus and Hagkaup grocery stores in Iceland, nor the media company 365, which publishes Fréttabladid daily.
According to Morgunbladid, smaller financial companies, such as the savings banks Byr and SPRON, have unsecured mortgage claims to Baugur worth ISK 48 billion (USD 431 million, EUR 337 million), which might be lost with its bankruptcy.
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