Icelandic saga spreads chill from freezer cabinets to soccer clubs

October 7, 2008

icelandic-glacier.jpgIt’s already on a geological fault line — now the economy of Iceland risks being torn apart by the banking crisis.

But the saga of the North Atlantic island of Iceland does not stop at its own rocky shores.

Riding a wave of cheap borrowing, Icelandic investors spread their interests far and wide, taking stakes in companies as diverse as New York department store Saks, Finnish insurer Sampo and English soccer club West Ham United.

Most famously Baugur, an investment group controlled by entrepreneur Jon Asgeir Johannesson bought up large swathes of Britain’s high street, from the Iceland frozen food chain (appropriately enough) and Hamleys toy store to House of Fraser department stores and fashion group Mosaic.west-ham.jpg

But what happens now? The cheap credit has dried up; two of Iceland’s biggest banks have been bailed out by the government; credit insurer Euler Hermes has stopped cover for suppliers to some of Baugur’s empire; and West Ham’s Icelandic owner Bjorgolfur Gudmundsson has already been hit by the collapse of team sponsor XL Leisure.

Gudmundsson chairs Icelandic bank Landsbanki, which has now stopped customers withdrawing money from its British internet bank icesave.

Will the hardy Icelanders weather the storm, or will they be forced to sell into a market where they may struggle to find buyers? A case of shop until you drop, perhaps.


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