been hit by administrations, possible sales and much more.
Brian Rogerson reports on the latest
developments.
As Iceland rushed to stave off economic ruin by announcing a $6
billion (€4.7 billion) International Monetary Fund rescue package,
eyes in the UK were on the collapse of Iceland’s banks – all of
which had representation in the UK.
Go deeper with GlobalData
In early October, following the nationalisation of Iceland’s
three private banks, Kaupthing, Landsbanki and Glitnir, the
country’s central bank issued a bleak forecast that predicted the
collapse of the country’s banks would be “extremely burdensome” and
the subsequent economic contraction “very sharp”.
As Iceland tried to shore up its economy, the UK government sent
emergency teams into three of the 166 local councils that, in
total, have £858 million (€1.1 billion) deposited in Icelandic
banks. Of these, 13 local authorities admitted they may face
“short-term problems” because of the blocked deposits.
Meanwhile, the future of the leasing operations of the three
Icelandic banks operating in the UK is the subject of much
speculation.
Kaupthing Singer & Friedlander
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By GlobalDataHistorically, Kaupthing Singer & Friedlander (KSF) has had a
fairly impressive record in asset finance. In 2006, KSF launched an
aviation leasing service, aimed at high net worth individuals,
headed by Austin Smith.
The majority of KSF deals, however, were in the public sector
area, where the high-profile health care operation was headed by
Anne Fillis, managing director of the division.
It also built up other asset finance companies over recent
years, including Central Scotland Finance Limited, East Anglian
Finance Limited, Hermes Lease Finance and Coachlease. Directors
with overall responsibility included, in addition to Fillis, James
Cannon, Paul Tagg and company secretary Malcolm Briggs.
Despite this growth, the board of Kaupthing made the decision
earlier this year to sell off its leasing portfolio, understood to
be worth £800 million.
Meanwhile, it made clear, it was very much business as usual
until a buyer was found.
On the surface, even relatively late into 2008, things looked
quite healthy.
At the end of June this year, Fillis, in an email to Leasing
Life, said: “I wanted to make you aware that, while Kaupthing
has announced the possible sale of its asset finance division, the
business units within asset finance are continuing to trade and are
actively funding new equipment deals.
“I am responsible for the health care division, which lends to
the public sector, and I can assure you we have not withdrawn from
the market and remain an active participant.”
However, the results for Singer & Friedlander Leasing for
the end of 2007, which were published last month, showed a
less-than-rosy picture.
While turnover had increased by virtually 100 percent to £34.4
million (2006 figure: £17.2 million), profit before tax had fallen
to £347,226 (2006: £3.3 million) and the company had a negative
working capital of £165 million – a current ratio of 0.35.
Furthermore, despite having net assets of just more than £5
million, its deferred tax liabilities totalled £15 million, against
just more than £6 million the year before.
Meanwhile, rumours continue to abound regarding the sale of
Kaupthing’s leasing businesses. It is now a well-known market
rumour that Lombard offered a price for Kaupthing’s portfolio – not
the business – but was turned down by Kaupthing.
One industry observer remarked it must be extremely frustrating
for current management and staff that they are required to remain
in place until the uncertain future of the company is resolved – or
a buyer found.
The observer added: “When the company was first up for sale in
April, an early buyer for its health care division was reputed to
be Lombard, the Royal Bank of Scotland subsidiary. The health care
division is very much the ‘jewel in the crown’ as far as KSF is
concerned and it has been well run and managed over the years.
“However, the impending crisis among the banks, plus the fact
the health care division was not to be sold separately, put paid to
Lombard’s interest.”
Since ING Direct took on the personal savings book of Kaupthing
Edge, ING Lease was hotly tipped to make a bid for the health care
business. Chris Stamper, chief executive of ING Lease, stressed to
Leasing Life, however, that he “could not possibly comment
on such rumours”.
Possible other contenders for KSF’s asset finance business may
be Siemens Financial Services and Hitachi Capital UK – both of
which have health care finance operations. Both lessors, however,
refused to be drawn on the issue.
Landsbanki Commercial Finance
Landsbanki Islands, the parent of Landsbanki Commercial Finance,
is one of Iceland’s largest banks, with an after-tax profit in 2007
of ISK39.9 billion (€26 million) and net income from operations
amounting to ISK 110.0 billion – a year-on-year increase of 23
percent.
In 2006, it launched Landsbanki Commercial Finance (LCF) in the
UK and headed it with former GMAC executives Matt Goddard and Peter
Finlay. The company’s remit was to develop operations in the
middle-ticket sector with a minimum funding amount of around
£500,000 and a top limit of £20 million.
The UK operation began by leveraging off the bank’s existing
aviation and marine business and entering the recycling, waste
handling and wind farm financing sectors. Leads were generated from
the bank’s branches in Manchester, Birmingham and London.
Meanwhile, in 2000, Landsbanki had acquired Heritable Bank (HB),
which specialised in finance services for property development
ventures and housing contractors. With HB’s acquisition of Key
Business Finance Corporation in March 2005, the bank began to
specialise in short-term financing for the legal profession.
Although LCF’s UK head office is in London, its operation in
Manchester, headed by ex-GMAC commercial finance directors David
Lomax, Peter Jones and David Nadler, succeeded in financing several
major local corporate transactions.
The team established a strong reputation for asset finance
transactions, including two separate deals into Blackley-based B3
Cable Solutions and a £35 million funding line into Saltaire-based
set-top boxes firm Pace Micro.
This June, LCF announced it intended to “wind down” the majority
of its leasing operations. A spokesman cited the highly competitive
state of the marketplace as the reason. However, some industry
observers pointed to LCF’s exposure to the failed plastics-moving
manufacturer Global Engineering Plastics (GEP) as a prime cause of
withdrawal. GEP was called into administration earlier this year
owing LCF £6.4 million.
Heritable Asset Finance
Meanwhile, HB’s subsidiary, Heritable Asset Finance (HAF), which
had for some time specialised in small-ticket deals ranging in
value from £2,500 to £100,000, predominantly for computer and
office equipment, was taken into administration on October 7 this
year.
As recently as June, the company was believed to be prospering.
HAF recorded £75 million in new business for 2007 – up 50 percent
over the previous year – pre-tax profits of £442,000 and a net
profit of £261,000.
Most business was sourced from intermediaries, and in June 2008
new business levels were reported to be buoyant, although the
company admitted to being “cautious about certain sectors of the
economy and debt serviceability in general”.
The joint administrators, from Ernst & Young, said the
company has not ceased to trade and is to continue to manage its
current loan book while a potential buyer is sought. It is
extremely unlikely however, that new business is being sought under
the current conditions.
