ANALYSIS: IT WAS a normal trading day at Arnotts flagship department store on Dublin's Henry Street yesterday but behind the scenes extraordinary changes were taking place, writes CIARÁN HANCOCK
The European Commission gave the green light for State- owned Anglo Irish Bank and Ulster Bank – which is owned by Royal Bank of Scotland, itself majority-owned by the British state – to take control of the famous Irish retailer.
So at least Arnotts has avoided being sucked into Nama. However barrister Richard Nesbitt and his fellow shareholders have had their equity stakes in the business wiped out.
It also surely signals an end to Nesbitt’s ambitious €750 million Northern Quarter project, which aimed to create a major new retail complex just off Dublin’s O’Connell Street.
His plan, which was lauded in the heady days of the Celtic Tiger, was to revitalise this busy but neglected part of our capital’s inner city.
Nesbitt, with the backing of Anglo and Ulster, acquired a lot of property in the vicinity to create a substantial footprint from which his vision could rise. That dream has bitten the dust.
Instead, the banks, who are owed more than €300 million, are preparing to devise a strategy that will enable them to claw back as much of their money as possible.
The timing could not be worse. Retail sales in Ireland remain weak and most commentators do not expect the rate of unemployment here to decline until 2012.
Property values in Ireland are on the floor and could yet fall further after three nightmare years.
Now is not the time to sell the properties beside Arnotts that were acquired for the Northern Quarter project.
The banks’ first task is to stabilise the company’s trading performance. Sources were yesterday indicating that Arnotts had a decent first six months of this year but the crucial trading period is around Christmas time, so the jury remains out.
Mark Schwartz, the head of Palladin Capital Group, has suddenly become an important player in the Arnotts narrative.
Little known on this side of the Atlantic, Schwartz has a strong retail CV in the US. Palladin has been advising the banks on Arnotts for some months now.
A number of consultants have been drafted in, including Nigel Blow, who briefly ran Brown Thomas in Dublin, and Caryn Lerner, former president and chief executive of Holt Renfrew, a high-end retailer owned by Galen Weston.
They will all now be key players in deciding the future direction of Arnotts. Whether Nesbitt or Arnotts chief executive David Riddiford will have roles to play remains to be seen.
Privately, the banks say they are in Arnotts for the medium term.
Speculation of a trade sale to the likes of Britain’s John Lewis, which had planned to open a large store just around the corner from Arnotts on the site of the old Carlton cinema, has been dismissed.
For now, it’s a case of keeping the business ticking over and hoping that the dark cloud that currently hangs over Arnotts will eventually have a silver lining.
