Icelandic company in the UK attempts to get money from Kaupthing. Says its deposit is Guranteed. Possible target for suing??

Posted 09/12/2008 - 13:30 by dawes

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2008-12-09 (All day)

Bakkavör seeks to defrost cash

By Sarah O'Connor, Anousha Sakoui and Maggie Urry

Published: December 9 2008 02:00 | Last updated: December 9 2008 02:00

Bakkavör, the UK's largest producer of fresh prepared food and ready meals, is in talks with its banks over £150m it has trapped in a failed Icelandic bank.

The deposit is trapped in Kaupthing, an Icelandic bank that collapsed in October, say people familiar with the situation, putting the company at risk of breaching some technical conditions in its debt covenants with its banking syndicate.

The Bakkavör business is stable, not cash constrained and financed locally in the UK. However, Iceland is facing a foreign currency shortage, meaning Kaupthing is currently unable to transfer Bakkavör's sterling deposit to the UK.

The company is working with long-term advisers Rothschild to negotiate over the issue with its 17 banks. There is no suggestion that Bakkavör, which has net debt of about £400m, is suffering from any liquidity problem. Bakkavör said last night that the deposit was fully protected by the Iceland Depositors and Investors Guarantee Fund. Rothschild was unavailable for comment.

The supplier to leading UK food retailers, including Tesco and Marks and Spencer, has struggled this year. It reported a £3.7m pre-tax loss in the third quarter, compared with a £14.7m profit in the same three months of 2007. It blamed weakening consumer confidence, rising raw material and energy costs, poor summer weather and restructuring efforts.

Bakkavör was also forced by the Icelandic banking crisis to close a 10.9 per cent position in Greencore, an Irish-based rival, at a loss of £58.5m.

Separately, Ágúst and Lydur Gudmundsson, the brothers who founded Bakkavör and who are respectively its chief executive and chairman, have offered to buy the 39.6 per cent of shares held in Bakkavör by Exista, the Icelandic investment group.

The brothers yesterday took over Exista, on which they were also board members. The investment company was damaged by the Icelandic financial crisis; its shares were suspended in October on the Icelandic stock exchange.

The brothers gained an 88 per cent stake in the investment firm using another of their vehicles, BBR, prompting a mandatory takeover bid for the rest of its shares.

Further highlighting the web of links between Iceland and the UK, Exista is the biggest shareholder in JJB, the sports retailer.