Revealed: Tchenguiz and his Icelandic loans
A report leaked to the Telegraph newspaper shows Robert Tchenguiz was the single biggest client of Icelandic bank Kaupthing.
Tchenguiz was loaned an extraordinary 1.74bn Euros by the stricken Icelandic bank. A total of 1.374bn Euros was lent to Tchenguiz to "build up stakes in public and private companies". Tchenguiz also sat on the board of Exista, Kaupthing's biggest shareholder with a 22% stake.
The Telegraph report claims that the bank's lending pattern showed a "haphazard approach to risk, whereby little or no collateral was offered for substantial loans". Kaupthing lent a total of 6.4bn Euros to companies linked to just six key clients, four of whom were major shareholders in the company.
Tchenguiz used money lent by Kaupthung to build up a 22% stake in Mitchells & Butlers, which led to key lieutenants gaining places on the board. Tchenguiz also bought a series of managed pub companies which he combined in Laurel Pub Company.
He also acquired 440 tenanted pubs from which Globe Pub Company was created. The investments that Tchenguiz held in managed pub companies were ceded last October when Kaupthing moved to sell Tchenguiz's investment in M&B to Bermuda billiionaire Joe Lewis.
A source told the Morning Advertiser earlier this year: "The equity that Tchenguiz had in number of businesses was included in the original deal that Tchenguiz did with Kaupthing last October."
Earlier this year it was revealed that Kaupthing had an unpaid £643m overdraft outstanding from a Tchenguiz-linked company, Ocsatello.
Tony Shearer, who was chief executive of the 100-year-old British bank Singer & Friedlander when it was taken over by Kaupthing in 2006, told the Daily Telegraph: "The leaked document shows absolutely appalling practices. Anybody reading that document could see it is a totally unbalanced loan book."
Opinion by The PMA Team
The Telegraph report sheds a lot more light on just how much money Robert Tchenguiz had at his disposal to build stakes in companies like Mitchells & Butlers.
It looks like Kaupthing wanted to behave like a hedge fund, but with the key decisions delegated to entrepreneurs it thought had outstanding form like Robert Tchenguiz.
With a huge Icelandic war chest, Tchenguiz certainly succeeded in bending M&B in his direction. In the event his edgy plan to spin off the companies freehold property was only halted by the start of the global credit crunch in the middle of 2007.
But once markets started to head in the wrong direction, Tchenguiz's strategy was bound to deliver sizeable losses for any lender unable to ride out the economic storms. The collapse of Lehman Brothers in September 2007, and the shock waves it caused, forced Kaupthing to sell Tchenguiz's sizeable stake in M&B at a low point for the shares, crystallizing hefty losses.
It could be that Kaupthing has managed to turn 1.74bn Euros into a sum considerably less half that size through it's unusual lending practices. It's eye-watering stuff and Robert Tchenguiz can claim his own unique place in the history of pub investment — nearly everything he touched turned sour.
