Landsbanki Collapse Raises Loan Concerns At Borders

Fri, 10 Oct 2008

Fears have been raised over the future business of Borders, one of the UK’s leading book retailers, following the turmoil at the Icelandic bank Landsbanki .

The retailer secured a £23m asset-based loan from Landsbanki earlier this year and also has an overdraft facility with the troubled lender, which was taken over by Iceland's Financial Services Authority earlier this week.

But its ties with Landsbanki have led to it becoming embroiled in the lender’s financial difficulties and there are now concerns that it could find its access to working capital restricted in the long-term while the Icelandic government decides what to do with the international operations of Landsbanki .

It has been speculated that the Icelandic authority may force the bookseller to pay back some of its asset-based loan, although the terms of the deal are unclear. The £23m inventory facility is secured against book inventory in the retailer's stores and distribution centre.

The news is likely to fuel speculation that Iceland’s financial crisis will have serious long-term implications for UK businesses, particularly high street retailers .

Borders UK was bought by private equity firm Risk Capital in September 2007. The high street retailer has 40 book stores based across the UK .
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