This is interesting. Could he be the first major investor to go broke in this deflation of the asset bubble?
Demands for the recall of loans from crisis-stricken Icelandic bank Kaupthing have forced property tycoon Robert Tchenguiz to sell major stakes in J Sainsbury and Mitchells & Butlers, Britain\’s largest pub operator, realising estimated losses running to more than £800m.
Tchenguiz lieutenants Aaron Brown and Tim Smalley were immediately removed from the board of M&B, underlining the property investor\’s evaporating influence. Brown also left the board of SCI Entertainment, the video games group behind the Lara Croft series, in a move expected to presage an imminent disposal of some or all of Tchenguiz\’s 22% in that business. He may also review a 3% holding in Whitbread, the company behind the Premier Inns and Costa Coffee chains.
Some 172m shares in J Sainsbury are believed to have been placed yesterday at 250p each, less than half the price at which Tchenguiz bought much of his holding last year in the midst of two failed takeover approaches for the supermarket group – approaches he did much to encourage.
Essentially he\’s been running a highly geared play on UK commercial property. Given that both gearing and property are screwed right now how well is he going to come out of this?
Does Kaupthing have the right to “demand the recall of loans”? If the funding is being done as commercial paper (rather than overdraft, which it surely wouldn’t be), doesn’t he get it for the duration of the term no matter what happens to the lender…?
Or is this newspaper-ish for “can’t refinance the loans when they become due”? Or
I assume you’re using “broke” is a relative term, I doubt he will be down the job-centre any time soon.
John – you’re forgetting about banking covenants… Most large office blocks in London are almost certainly held by highly-leveraged (and offshore) SPVs technically in breach of their covenants, but so long as the interest payments keep getting made, banks have been reluctant to knock their balance sheets down by a few hundred million punds at a time. Now, however, they need the cash, so firesales can be expected imminently…
As an aside, I don’t think Kaupthing were in the business of issuing that much commercial paper – from what I saw of their lending habits (on a certain literally high-profile London development) they preferred to syndicate their loans to about four parties rather than back bond issues.
“you’re forgetting about banking covenants”
Yes, that’s exactly what I’m doing. Cheers Richard.