As I presume you know, the major economic base for Björgolfur Gudmundsson, our chairman and owner, is his ownership of a substantial part of the largest bank in Iceland – Landsbanki.
To have a banker as the owner is not the most comfortable position in times of credit crunches.
To have an Icelandic banker as the owner may be even worse since the currency rate of the Icelandic króna has been in free-fall the last days and the economic state of Iceland is shaky. This is reflected by the fact that that Standard & Poor’s (provider of independent credit ratings) had downgraded the credit rating of the Icelandic state and that Moody’s (ranks the credit-worthiness of borrowers) is considering lowering the rating of Iceland’s largest commercial banks, Landsbanki and Kaupthing.
The other day Glittnir, the third largest Icelandic bank, was nationalized, or rescued if you wish, by the Central Bank of Iceland that bought 75 percent of its shares for 600 million euros which the bank was desperate to get. Otherwise it would have been unable to pay its debts and would face bankruptcy.
How does this affect Landsbanki and West Ham?
OK, hold your horses, one thing at a time, first – how will this affect Landsbanki?
Now that’s a tough one. Banks and other financial institutions appear to be just fine until the day they run to governments for help. We’ve seen this again and again, with Lehman brothers, Fortis and Glitnir being recent examples.
A statement saying “We have sailed through rough seas in the financial turmoil but was now heading into calmer waters and stability” seem to be the economic equivalent of ”The board is fully behind the present manager”.
The very day Glitnir gave up, Björgólfur Thor Björgólfsson, major owner and chairman of Landsbanki Bank, and son of our chairman, met with Icelandic Prime Minister Geir H. Haarde, allegedly to discuss the possible merger of Landsbanki and Glitnir Bank.
BTB refused to comment on anything, leaving the door open for speculation on the economic solidity of Landsbanki.
But an Icelandic newspaper Fréttabladid claims Landsbanki are interested in merging with Glitnir.
Now, if that mean that both banks need to be secured or that Landsbanki sees an opportunity to buy Glitnir for a song, is too early to say.
OK, how will it affect West Ham?
Well, take away the economic foundation of a clubs owner and you may be able to guess what may happen.
Still, on many West Ham forums this has sometimes been commented with “West Ham is funded with BG’s private money”, insinuating that the fact that almost half of the value of his shares have “disappeared” in less than a year will not affect us as a Club.
To have a banker as the owner is not the most comfortable position in times of credit crunches.
To have an Icelandic banker as the owner may be even worse since the currency rate of the Icelandic króna has been in free-fall the last days and the economic state of Iceland is shaky. This is reflected by the fact that that Standard & Poor’s (provider of independent credit ratings) had downgraded the credit rating of the Icelandic state and that Moody’s (ranks the credit-worthiness of borrowers) is considering lowering the rating of Iceland’s largest commercial banks, Landsbanki and Kaupthing.
The other day Glittnir, the third largest Icelandic bank, was nationalized, or rescued if you wish, by the Central Bank of Iceland that bought 75 percent of its shares for 600 million euros which the bank was desperate to get. Otherwise it would have been unable to pay its debts and would face bankruptcy.
How does this affect Landsbanki and West Ham?
OK, hold your horses, one thing at a time, first – how will this affect Landsbanki?
Now that’s a tough one. Banks and other financial institutions appear to be just fine until the day they run to governments for help. We’ve seen this again and again, with Lehman brothers, Fortis and Glitnir being recent examples.
A statement saying “We have sailed through rough seas in the financial turmoil but was now heading into calmer waters and stability” seem to be the economic equivalent of ”The board is fully behind the present manager”.
The very day Glitnir gave up, Björgólfur Thor Björgólfsson, major owner and chairman of Landsbanki Bank, and son of our chairman, met with Icelandic Prime Minister Geir H. Haarde, allegedly to discuss the possible merger of Landsbanki and Glitnir Bank.
BTB refused to comment on anything, leaving the door open for speculation on the economic solidity of Landsbanki.
But an Icelandic newspaper Fréttabladid claims Landsbanki are interested in merging with Glitnir.
Now, if that mean that both banks need to be secured or that Landsbanki sees an opportunity to buy Glitnir for a song, is too early to say.
OK, how will it affect West Ham?
Well, take away the economic foundation of a clubs owner and you may be able to guess what may happen.
Still, on many West Ham forums this has sometimes been commented with “West Ham is funded with BG’s private money”, insinuating that the fact that almost half of the value of his shares have “disappeared” in less than a year will not affect us as a Club.
When BG once bought his shares in Landsbanki he likely funded the deal with borrowed money – that’s what businessmen do.
This loan was probably given with these same shares as security, much in the same manner a bank uses a house as security for a house loan.
However, if the value of these shares are falling close to or below the size of the loan, the lending bank may feel insecure.
This loan was probably given with these same shares as security, much in the same manner a bank uses a house as security for a house loan.
However, if the value of these shares are falling close to or below the size of the loan, the lending bank may feel insecure.
Maybe insecure enough to urge BG to pay some of it back and in turn forcing BG to sell some of his other “private” assets – for example his share of West Ham united. This is a part of so called credit crunch”.
If a businessman has so much money/assets that he can shrug something like this off, he is a Russian oligarch or a Saudi oil sheik.
Well BG is not that wealthy. He needs his project to be economically sound and this is also reflected in all sorts of statements from the club the last year or so saying that “The club is being run on sound football and business principles…”. BG is quoted as saying " …[buying West Ham] is also a business opportunity. English football has become a very high-worth entertainment, like Hollywood films. There is a great deal of television money and you can see commercial opportunity flowing from that."
If a businessman has so much money/assets that he can shrug something like this off, he is a Russian oligarch or a Saudi oil sheik.
Well BG is not that wealthy. He needs his project to be economically sound and this is also reflected in all sorts of statements from the club the last year or so saying that “The club is being run on sound football and business principles…”. BG is quoted as saying " …[buying West Ham] is also a business opportunity. English football has become a very high-worth entertainment, like Hollywood films. There is a great deal of television money and you can see commercial opportunity flowing from that."
But this is not the only economic reason to do business in east London.
At the time of the takeover in 2006 it was widely speculated that West Ham would get a good deal when “taking over” the newly built Olympic stadium. Making it possible for West Ham owners to redevelop the existing West Ham site.
Thus, a “sound business principle” at the time when BG bought the club could well have been the possibility to make an Icelandic Króna or two on land speculation.
But this has taken a few turns since 2006 and the Olympic stadium does not look like a viable option. The Parcelforce depot and other alternatives may also have economic merits, but at this time of instability in the land-market it must be a bigger gamble.
Even though an Eggert Magnusson spokesperson once said "…people don't come into football to make money...”, most people that come into football are not immune to losing money either, or even immune to economic possibilities going up in smoke.
Today The Guardian hinted that a fresh bid had been placed for West Ham, but was turned down by BG (Guardianarticlehere).
But this has taken a few turns since 2006 and the Olympic stadium does not look like a viable option. The Parcelforce depot and other alternatives may also have economic merits, but at this time of instability in the land-market it must be a bigger gamble.
Even though an Eggert Magnusson spokesperson once said "…people don't come into football to make money...”, most people that come into football are not immune to losing money either, or even immune to economic possibilities going up in smoke.
Today The Guardian hinted that a fresh bid had been placed for West Ham, but was turned down by BG (Guardianarticlehere).
The Guardians conclusion was that BG “wants to enjoy his football for a while”.
At first I thought this felt reassuring, but if true, it could also be a first step in a bidding process.
If BG doesn’t consider his West Ham venture to be “economically sound” while his economic muscle may be needed to consolidate his financial base, maybe the conclusion will be that he no longer can afford his pet anymore, and we can look forward (?) to a new owner.
At first I thought this felt reassuring, but if true, it could also be a first step in a bidding process.
If BG doesn’t consider his West Ham venture to be “economically sound” while his economic muscle may be needed to consolidate his financial base, maybe the conclusion will be that he no longer can afford his pet anymore, and we can look forward (?) to a new owner.
Edit: Now there is rumour that a second bid has been placed, not rejected, and that the bidder is an east european businessman.
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For this post I am in deep debt to http://www.icelandreview.com/
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