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Thor’s tale

19 Dec 2014 By Quentin Webb

Bjorgolfur Thor Bjorgolfsson embodies Iceland’s volcanic rise and fall. He made a fortune in Eastern Europe, lost a bank in 2008 and caused Deutsche Bank years of grief. His memoir, “Billions to Bust – and Back Again,” is self-critical – but unlikely to win him new friends in Reykjavik.

This book is doubly notable. Even by the standards of a bubbly, anything-goes era, Iceland’s brief cameo in world finance was odd. And – former AIG chief Hank Greenberg aside – bosses and bankers vilified for the global financial crisis have generally kept quiet.

There’s a lot of ground to cover. Bjorgolfsson got started in St. Petersburg, where he navigated the post-communist chaos, including death threats, to build a big brewer which Heineken eventually bought for $400 million. He dismisses persistent talk of mafia ties as “nonsense.” He says he kept a low profile and relied on a senior ex-KGB officer to scare off troublemakers. Other deals followed in Bulgaria, Czech Republic and elsewhere.

Gradually, his focus shifted back towards Iceland, culminating in 2007 with the $7 billion buyout of Reykjavik-listed drugmaker Actavis. The self-styled “deal junkie” took his chances, starting with extreme leverage. The 12.5 ratio of debt to earnings before interest, tax, depreciation and amortization is more than twice the level that worries U.S. bank watchdogs today. Bjorgolfsson also skimped on due diligence. And his lenders at Deutsche Bank refused to spread the risk by cutting rivals in on the deal. “I saw their eyes gleam and I took their money,” he writes.

It all went horribly wrong. Actavis had trouble with U.S. regulators and debt markets froze, so Deutsche could not sell on the debt. An Actavis collapse would have blown a 4 billion euro hole in the bank’s balance sheet. “Some bankers even said to us that this could lead to the German chancellor, Angela Merkel, taking the keys to Deutsche Bank,” he writes.

That fear of a messy Actavis insolvency perhaps helped Bjorgolfsson stay onboard through a restructuring. In 2012, Actavis was sold out to Watson, which took the acquired company’s name and began a takeover spree that built up to the $66 billion purchase of Allergan. Bjorgolfsson wangled an earn-out and now has more than $1 billion in Actavis shares.


Back at home, Bjorgolfsson had serious trouble with Landsbanki. His father, Bjorgolfur Gudmundsson, was chairman of the bank that collapsed in 2008, along with rivals Kaupthing and Glitnir. The two men together effectively held a controlling stake. The son calls the government’s failure to save Landsbanki – the state tried abortively to help Kaupthing instead -“the biggest betrayal of my life.”

That emergency loan to Kaupthing was, indeed, a bad decision and one that remains unexplained. And Iceland’s crash reflects poorly on many people: complacent politicians, asleep-at-the-wheel regulators and the heavy-handed British, who resorted to anti-terrorism laws.

But come on. The banks lent huge sums to their own and each others’ major shareholders, and grew crazily: assets went from twice to ten times GDP in five years. Panicky officials may have been terrible crisis managers – but the banks laid the groundwork for the crisis. Iceland’s robust special prosecutor has since secured convictions, with jail terms, against several bank executives.

Moreover, disputes with the British and Dutch over Landsbanki’s Icesave product posed such a threat to national interests that the nation rejected two repayment deals in referendums. Bjorgolfsson says, correctly, that most of the Icesave money will be recovered by winding up Landsbanki. But it has been a painful process.

What is this book for? It is not exactly an apology, though Bjorgolfsson admits being vain and hubristic. His blame-casting and complaints about his countrymen’s conformity and cronyism won’t help the author, who has long been based in London, mend many bridges in Iceland.

If anything, it reads like an entrepreneur’s manual, punctuated with platitudes (“everything is temporary”) and complete with a superficial discussion of global challenges. It would be more interesting to know what he means precisely by two passing references to a looming new crash. On that topic, it is worth heeding the warnings of someone who weathered Russia’s crisis in 1998 and was center stage in Iceland’s a decade later.


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