Sigrún Davíðsdóttir's Icelog

They blew it: Jon Asgeir Johannesson – Robert Tchenguiz

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‘They Blew It – The CEOs and entrepreneurs behind some of the world’s most catastrophic business failures’ is a book about businessmen who were served great opportunities on a silver tray and yet managed to blow it all. The book, by Jamie Oliver and Tony Goodwin, tells the story of fallen business gurus like Bernie Ebbers, of WorldCom fame now in prison, Lehman’s Dick Fuld and Enron’s Ken Lay who died while awaiting sentence – and also the story of two businessmen who very much embodied the rise of Iceland as a finance centre and its collapse: Jon Asgeir Johannesson or the ‘rock star’ as Oliver and Goodwin call him and the UK businessman Robert Tchenguiz who got ‘credit crunched’ according to Oliver and Goodwin.

I haven’t read the book yet, only glanced at it on Amazon but Asgeirsson is quoted as saying that he clearly had too much on his plate. Baugur’s ex-CEO Gunnar Sigurdsson blames Baugur’s failure on the biggest recession for 100 years adding that they had a great team and did good things.

‘Really?’ ask the authors. ‘While the global recession may have speeded up the collapse, it is stretching credibility to place all the blame at the door of the global economy. The business plan was ill-conceived. They got it wrong. They paid the price.’

The authors find it difficult to believe that Johannesson will succeed in staging any come back after such ‘a spectacular fall from grace’ and ‘being reviled’ in his homeland. Some blame the demise of Iceland’s economy on a small population the authors stress others on regulatory failure, Icelanders’ inability to head advice and even on machismo.

“Ultimately, in the case of Johannesson, it is about an entrepreneur having a little too much self-believe – and far too much debt.”

The same could be said of Robert Tchenguiz who is the largest debtor to the Icelandic banks, almost solely through loans with Kaupthing. Tchenguiz wasn’t only close to his accounts but very close to Kaupthing’s management for whom he was an important contact to other businessmen. He is thought to have brought quite a bit of business to the bank. No doubt a bit of a quid pro quo there: he brought in business opportunities, the bank was overly positive to lend Tchenguiz money.

That Baugur’s business plan was ill-conceived is an interesting observation. As Baugur was buying up assets at a frenetic pace – in Iceland, the UK and elsewhere – it was indeed difficult to gauge what the grand scheme was. Here in the UK Baugur presented itself as a retailer, a business conglomerate with roots in retail and retail was what they did best, they said. But then the expansion stretched to media as well, not forgetting buying up an absolutely staggering property portfolio in Scandinavia. At times Baugur looked like private equity except it never sold anything unless as a part of an asset merry-go-round with business partners such as Fons.

During 2008 Tchenguiz’ debt with Kaupthing went up by 80%, reaching the staggering number of €2,2bn. In a TV interview with Johannesson just after the collapse in October 2008 the journalist mentioned with some disbelief that Johannesson’s debt might be as high as €260m. Johannesson didn’t comment on this incredible number at the time. It now seems clear that Johannesson’s debt with the Icelandic banks was around €1.5bn. The total amount is even higher since this number only includes debt with the Icelandic banks in Iceland, not in Luxembourg.

Now two years later we know a lot about Johannesson’s and Tchenguiz’ operations thanks to the spectacular work of the Althingi Investigative Commission. But we still don’t know why all the banks were so incredibly willing to lend insane amounts of money to so few people, why the banks so easily put aside their own rules to service these chosen customers like Johannesson and Tchenguiz and how come that with exorbitant debts and shrunken assets these and other favoured clients of the Icelandic banks aren’t bankrupt.

With investigations going on in Iceland and the UK there will be those who ask if these two will share the fate of people like Bernie Ebbers.

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Written by Sigrún Davídsdóttir

October 10th, 2010 at 11:14 pm

Posted in Iceland

One Response to 'They blew it: Jon Asgeir Johannesson – Robert Tchenguiz'

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  1. I think if you dig into it, you will probably find that there was a quid pro quo of either buying bank shares, or lending money back to the banks in the form of subordinated debt.

    It is possible to exploit the Basel Bank regulations doing this, in such a way that money is created by the commercial banks, this in turn can be used to make loan, and then if the borrowers co-operate, some of that debt can be re-looped around the system.

    The evidence for money creation of some kind going on is fairly clear – the total amount of ISK in the Icelandic banking system, either as physical notes and coins or on deposits expanded by 10 times in the 7 years after the Banks were privatised and before they went bankrupt.


    30 Nov 10 at 1:19 am

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