Entries Tagged 'business' ↓

And just like that, the world we live in has changed. One week we are one happy rich western world, the next we are bankrupt countries arguing about who owes whom?

Now, before you stop reading because you don't want to hear anymore about the state of the economy, let me assure you, this is about something far bigger than that.

Bigger than the economy? Yes, much, much bigger! It is about our freedom, our democracy and our way of life that are under threat from our own government...

But in order to explain this, I need to go into the latest economic developments first, so bear with me for a second.

About two weeks ago, the 12th bank in England, Kaupthing, asked the British government to take part in the bail out plan that they had drawn up. Kaupthing asked for a loan of £4bn on a budget of 5,000,000,000 pounds. So the 12th bank in the UK asked for LESS than 1% of this bail out fund, but were denied access by Gordon Brown and Alistair Darling.

A week later the poop hit the Icelandic fan. Its third bank, Glitnir was nationalized by the national bank of Iceland and a few days later Landsbanki, with its British arm Icesave went the same route. The Icelandic economy was going down the drain in less than 48 hours. But this national bankruptcy also hit the English shores. As it turned out British citizens, local authorities, and charities had some £8bn in accounts with Icesave, lured by the high interest rates the Icelanders were offering.

Now comes the confusing part of the story. In statements, made in Icelandic to the Icelandic press and people, Prime Minister Haarde stated that his country guaranteed all deposits made to this bank. Unfortunately, in the English part of his press conference has was less straight forward, and from what I have read in the British press, he was less forthcoming in conversations with Gordon Brown and Alistair Darling. In the Icelandic government there is to this day great confusion why the English government was not assured by their commitments. I think the answer to this might simply be a cultural one. Yes, Icelanders speak 'good English', they know all the words, but in order to negotiate on this level you can not simply translate the words.

Meanwhile, Iceland's biggest bank, Kaupthing, who also operate in the UK, kept putting out statements saying that they were healthy, with plenty of cash and working with the Icelandic government to find a solution to the nation's troubles.

And then we woke up one morning to read in the newspapers the the British government had used anti-terrorist laws to seize all of Kaupthing's British assets and sold them ING from Holland. They sold an £8bn company with a 60% discount to the first buyer they could find, leaving Kaupthing bankrupt and pushing Iceland into the abyss.

That they are bankrupt is sad, but not the most important thing in this development!

The English government used ANTI-TERRORIST-LAWS against a PRIVATE company!

This Anti-Terrorist law in (not so few words) states that the PM and his cabinet can do anything to anyone if they feel that there is a threat to the British society, its health or its interests without the immediate consent of the houses of parliament.

It is a law that actually predates 9/11, but had so far NEVER BEEN USED.

Let me put this in one big phrase for you. The British Government seized all assets of a privately owned company, because its owners hold the same passport as the owners of a different company, who may or may not be about to forfeit their duties in England.

That's right, because they held the same passport and were also a bank their possessions are up for grabs! No judge, no jury, no trial, all it took was the word of our leader...

Like I said, I do not care about the economy and although I have a personal relationship with Iceland, I have no sympathy for the upper classes there. Should they become beggars through all of this it might even put a smile to my face.

Now that I am back in old Blighty, my problem is with Gordon and his cronies and their interpretation of laws. And with my fellow countrymen who rewarded these dictators with a 10% boost in the polls! Now that Gordy has opened up this "can of worms" with some success, what else can we expect from a man with still his back against the wall?

Next time two Muslim doctors decide to drive their burning Range Rover into a public building, Gordon might order the arrest of all doctors who own a similar Rover.

Next time a black teenager from London stabs another black teenager from London the constabulary could round up all London teenagers and just lock them up.

Next time a chav kicks a father to death after a night out on the town, we should send in the builders. Build a wall around the nearest council estates without an exit and be done with it.

And that's not all. Now that we have set an international precedent with using these type of laws, the next time you fly to Thailand, the Thai government might incarcerate you. You are a tourist. You hold a British passport. Just like Gary Glitter did! And all the Thai people would be doing, is trying to protect their people.

Of course these are simplifications! Of course they are! But at the same time they are not. Once politicians find out the effects of these populist decisions on the electorate there will be no end to the abuse of these laws....

Like i said, i do not care about the economy, i do not care that much about Iceland and i did not lose any money this week, but i do care about liberty and democracy and those two got raped this week by the British government...

And after all this our Fearless Leader had the gall to call for a joint international approach to the credit-crunch. Joined, but please, no terrorists allowed.

Oh and one final, final thing before you start commenting. Please do not talk about "British interests" or "our money", because you'd be proving my point. It would be "your" money and "your" interests and not mine at all even if my council tax went up. Thus proving that this law was used unfairly, because "our" country,  "our" safety or "our" well-being was never in danger, but only that of a few investors and savers, however sorry i am for them!

These are perilous times, if we are to believe western international leaders. Men with beards from the Middle East hate our freedom and are willing to lay down their lives in the war against the infidel West.

These are also times of economic recession, if we are to believe financial pages in our news papers. The credit crunch and high oil prices are driving companies into bankruptcy. Inflation and unemployment are up, house prices and job openings are down.

All in all, these are scary and confusing times. Maybe that is why a local high street carpet store put this sign outside of their shop....

I just think this is stretching it a bit!

Surely I am not the only one who has read and seen the news about the XL Leisure Group and thought,"How strange that a profitable company purchased only 23 months ago, is so heavily in debt? what happened?"

The answers that I found may be considered good business practice in the real world, but I am truly confused to say the least. And to be honest, it reads a bit like a scam that Tony Soprano might pull off...

A timeline of events:

2004 to 2006- The Avion Group is formed and begins to acquire tour operators and airlines in France, Germany and the UK.

October 2006- The Avion Group sells nearly all airline holdings to a managerial group for $450m at a profit of $107m gross. The managers borrow a large sum of the investment capital from two Icelandic banks: Straumur Investment Bank and Landsbanki Íslands. The Avion Group guarantees the $280m loan to the managers from Straumur Investment Bank.

November 2006- The Avion Group becomes Eimskipafelagid, divested airline holdings become the XL Leisure Group.

August 2008- The XL Leisure Group is in debt to Barclays Bank for £10m due to fuel hedging issues.

September 2008- Eimskipfelagid (formerly the Avion Group), fearing that it may have to pay the guaranteed $280m loan, secures its position with the help of two Icelandic billionaires willing to invest. These men are father Björgólfur Guðmundsson (owner of West Ham United, who are sponsored by XL.com) and son Björgólfur Thor Björgólfsson, the richest man in Iceland. Together they are worth around $4.6 billion according to the Forbes list.
3 Days later it is curtains for the XL leisure Group in the UK. and they go into administration. XL France and XL Germany, both still profitable now belong to the Straumur bank to cover the still outstanding loan.

So far, so good and all looks pretty normal. But lets take a closer look at who is who in this game...

Lets start with XL Leisure Group. Well they are just XL, owned by a group of people who have been in the British travel industry for up to 2 decades.
Barclays is just Barclays, one of Britain's biggest banks.

And now lets look at the Icelandic site of the story;

Avion Group was the investment company started by Björgólfur Guðmundsson and Björgólfur Thor Björgólfsson
Landsbanki Íslands is 45% owned by Björgólfur Thor Björgólfsson, who is also the chairman of the board.
Straumur Investment Bank are at least 61% owned by Björgólfur Guðmundsson and Björgólfur Thor Björgólfsson, the last one is also the chairman of the board.
Eimskip is owned by Björgólfur Thor Björgólfsson.

There, that clears the whole thing up a bit. from now on Björgólfur Guðmundsson will be referred to as BG and his son, Björgólfur Thor Björgólfsson, will be called BTB...

Now... time to look at this history again

2004-2006 BG and BTB is formed and starts to acquire tour operators and airlines in France, Germany and the UK. BG and BTB name this operation XL Leisure Group

October 2006 BG and BTB sell XL Leisure to the managers of XL Leisure Group for $450m. BG and BTB make a profit of $107m before tax. The managers borrow a large sum of money for their investment from 2 Icelandic banks; BG and BTB and BTB. BG and BTB guaranteed the $280m loan to the managers from BTB.

November 2006 BG and BTB become BG and BTB

August 2008 The XL Leisure Group has run up a debt of £10m with Barclay's Bank.

September 2008 BG and BTB, fearing that hey may have to pay the guaranteed $280m loan, secure their position with the help of two Icelandic billionaires willing to invest in their business. These men are father BG (owner of West Ham United, who are sponsored by XL.com) and son BTB , the richest man in Iceland. Together they are worth around $4.6 billion according to the Forbes list.
3 Days later it is curtains for the XL leisure Group in the UK. and they go into administration. XL France and XL Germany, both still profitable now belong to BTB to cover the still outstanding loan...

Pretty simple and straight forward dealings! But some how it just does not feel right... 2 Years after selling their travel group BTB and Bg have their travel group back, but in a leaner, healthier form. The parts that didn't work have gone bankrupt without them carrying any real responsibility for it. They are not responsible for any debts that XL Leisure Group UK had with creditors, nor do they have to offer redundancy deals to any employees that would lose their jobs.

As it said in the timesonline.co.uk on sunday 14/09/08 "Behind the scenes, industry sources say, he (Peter Owen, then CEO of XL) began looking for investors to fund a new management buyout. The takeover, however, would have valued the business at much less than Wyatt and his colleagues had paid for it"

And with the National Bank of Iceland charging 15% interest, it would have been bad business if BG and BTB had lend the managers the money for the buyout for under 10%. That means that the interest alone to repay was $28 million, half of XL's annual loss.

How is it possible that a group of people who are renowned (and around Crawly hated) for their sharp business sense and with more than 15 years of experience in the airline industry did not see that this was simply a bad deal?! Did they lose their ability to calculate the worth of a company?

And last of all, WHY DID XL HAVE TO GO BUST? Why did BG and BTB prefer to cough up $280m to cover the loan, rather than..... GIVE BARCLAYS £10m, ADD THAT TO THE OUTSTANDING LOAN AND DEMAND XL SLIM DOWN ITS OPERATIONS? Why? Because BG and BTB are not about building companies, they are about quickly selling on at huge profits and do not care who gets done over! And now they get to sell XL France and Germany all over again.

http://en.wikipedia.org/wiki/Bjorgolfur_Thor_Bjorgolfsson
http://www.invgr.com/bjorgolfur_thor_bjorgolfsson.htm
http://en.wikipedia.org/wiki/Bj%C3%B6rg%C3%B3lfur_Gu%C3%B0mundsson
http://www.m-travel.com/news/2006/10/avion_group_ann.html
http://en.wikipedia.org/wiki/Straumur_Investment_Bank
http://en.wikipedia.org/wiki/Landsbanki
http://www.straumur.net/en/Investor-Relations/Share-information/Share-ownership/
http://www.eimskip.com/desktopdefault.aspx/tabid-687/
http://business.timesonline.co.uk/tol/business/industry_sectors/leisure/article4748313.ece