Icelandic tycoon still living the high life in London after the collapse of Icesave
The man known in the UK as ‘Thor’ runs an empire as opulent, and opaque, as ever, three years after the failure of the savings bank that swallowed up £5bn of UK savers’ money
Simon Bowers and Sigrún Davídsdóttir
The Observer, 28 August 2011
One of the world’s most extravagant superyachts, which recently became the most expensive item ever put up for sale at Harrods, was designed as a floating palace for a controversial Icelandic billionaire who, together with his father, controlled the bank behind Icesave.
The 90-metre luxury cruiser, projected to cost more than £100m, was to be the ultimate testimony to the vast fortune built up by London-based investment tycoon and amateur bodybuilder Björgólfur Thor Björgólfsson, known in the UK simply as “Thor”.
His lavish private spending plans, while unconnected to the affairs of Landsbankí, the bank behind Icesave, will stick in the craw of many British victims of the online savings scandal.
Thor’s relationship with Landsbankí, before it collapsed almost three years ago, has been criticised for allegedly providing him with abnormally easy access to borrowing, in his capacity as one of the bank’s largest shareholders. He denies this.
Lured by market-beating interest rates, hundreds of thousands of British savers, together with scores of councils and charities, poured almost £5bn into Icesave internet accounts, mostly between the start of 2007 and October 2008, when Landsbankí collapsed. Over the same period, companies linked to Thor rapidly expanded their already huge borrowings from the ill-fated bank. In fact, Landsbankí’s loan exposure to the Thor empire leapt by 58% to €973m over the period, according to a special investigation commission’s report for the Icelandic parliament. Thor disputes many of the report’s findings.
The collapse of Landsbankí forced Thor’s empire to retrench. The plan for a superyacht, known as Project Mars (a play on his thunder god name) [see footnote], were abandoned just as building work was about to begin at a shipyard in Italy. Since then the designers have been hawking the concept around, looking for another billionaire to pick up Thor’s dream.
With its almost vertical bow, Project Mars is designed to echo the shape of a dreadnought. The blueprint incorporates a helipad, a gym and spa, a seven-metre pool, a “beach club” and a sail-in “garage” to house a tender and two motorbikes. Artists’ impressions of the imagined interiors playfully include images of James Bond. The yacht had been a playboy’s dream for Iceland‘s richest son, echoing a life of entrepreneurial adventure that had seen Thor amass rapid fortunes in brewing, telecoms and pharmaceuticals in some of the most notoriously challenging eastern European markets, among them Bulgaria and Russia.
His equally swashbuckling compatriot, Jón Asgeir Jóhannesson, cultivated fame and became a celebrity figure on the business pages of UK newspapers as his Baugur empire bought stakes in British high street chains such as Hamleys, House of Fraser, Iceland Foods, Oasis, Karen Millen, All Saints and Goldsmiths. But Thor chose to avoid the media spotlight and his successes, though orchestrated from offices in Mayfair, went largely unnoticed. And despite his imposing stature and vast wealth, the young tycoon was outshone on the public stage when his father, Björgólfur Gudmundsson, bought West Ham football club in 2006.
Glimpses of Thor’s high living occasionally reached the Icelandic media, most notably when he flew friends out to Jamaica to celebrate his 40th birthday in 2007. The entertainment was provided by pop stars Jay Kay, 50 Cent and Ky-Mani Marley, Bob Marley’s son.
As well as having a reputation for partying that stretched back to his school days – when he is said to have run a Reykjavík nightclub and established Iceland’s first Oktoberfest beer festival – Thor was equally well known for the pride he took in his physique. Rumour spread in banking circles that he was immensely physically strong and could bench press more than 450lbs.
It was not until 2002, after significant success in Russia, that Thor and his father reinvested some of their newfound fortune in Iceland, acquiring a 42% stake in Landsbankí when it was privatised. At the time, there were murmurings about the suitability of Thor and his father as owners of a bank. The two appeared to have returned from Russia with a sizable fortune after selling a brewery in St Petersburg. They had earlier fallen out bitterly with fellow investors in a Russian soft drinks venture.
Moreover, recalled the detractors, Thor’s father had a blemished past, having been convicted in 1991 of false accounting and given a 12-month suspended sentence.
Initial misgivings were quickly drowned out as Iceland’s economic miracle, as it was at the time perceived, transformed one of Europe’s smallest economies into a financial powerhouse. And at the vanguard were the powerful banks whose affairs were tightly intertwined with a handful of seemingly Midas-like tycoons, Thor and Jón Asgeir among them. Then, abruptly, a shadow was cast over the party in 2006, as international bond markets started to question Iceland’s success, in particular the robustness of funding for the island’s voraciously expanding banks.
Landsbankí’s aggressive entry into the UK savings market in October 2006 was a direct response to this looming funding gap. “What we considered a permanent solution was simply not being as dependent on the financial markets,” said Landsbankí’s triumphant chief executive Sigurjón Arnason in early 2007. “All I have to do is to check at the end of the day how much money has come in: £50m was deposited only last Friday.”
But as concern about risky banks spread around the world in 2007, Britain saw a run on deposits at Northern Rock, and the government was forced into a bailout. Meanwhile, on the Icesave website, savers were told: “You can also rest assured that with Icesave you are offered the same level of financial protection as every bank in the UK.” Ultimately, savers were, rightly, unconvinced. A mini-run on deposits in spring 2008 temporarily abated, but began again after the fall of Lehman Brothers.
After a panic-filled weekend during which the Icesave website was shut, it fell to the then chancellor, Alistair Darling, to stop the run. The Treasury extended a state guarantee to Icesave retail deposits and at the same time temporarily seized the bank’s UK assets using emergency financial stability laws.
As a result of the scandal Landsbankí and Iceland’s ministry of finance was for a period placed on a UK list of “financially sanctioned” organisations alongside al-Qaida, North Korea and Burma.
While a major additional headache at a critical time for the UK, the failure of Landsbankí was part of a near system-wide financial meltdown in Iceland that effectively left the country facing insolvency. Iceland had to ask the International Monetary Fund for a loan.
In the frantic days before Landsbankí fell, Thor personally took part in meetings with Icelandic ministers in his capacity as a major shareholder in the bank. To those present he appeared to be in control of the bank, according to witness testimony later published in the parliamentary report.
Arni Mathiesen, who had been finance minster at the time and held talks with Darling over Icesave, claimed in his testimony to the commission that several bankers had lied to the government over a range of issues in early October. “The worst one was Björgólfur Thor Björgólfsson … he lied to others as well and they came to us later that evening and said: ‘Nothing that this man says can be trusted’.”
Thor has responded by accusing Mathiesen of misunderstanding the situation, and suggesting the former minister had been relying too heavily on competitor banks for information. He said he did attend some emergency meetings concerning Landsbankí “as a representative of the shareholders”, together with top executives from the bank.
Three years on, despite having to drop Project Mars, the 45-year-old tycoon retains many of trappings of the super-rich, including a townhouse in Notting Hill acquired in 2000 for £4m and substantially extended. Other UK assets include an Aston Martin car with a personalised number plate and a number of motorbikes. He declines to say whether he still owns a house in the Home Counties, a Challenger private jet, or a 42-metre yacht called Element.
“He neither uses nor operates a private jet or a yacht,” a spokeswoman for Thor said. “Many of his private assets were part of his settlement with all his creditors… Many of the assets he was previously reported to own may not be in his possession any more.” But neither the jet nor the yacht appears to have been sold.
Thor claims to have drawn a line under the financial turmoil that engulfed much of his business in 2008, and to have reached a confidential settlement with Landsbankí and other creditors a year ago. As a result the scale of his empire is harder than ever to measure.
He continues to pursue business interests from a penthouse office on Park Lane, but there are signs that his grip on his biggest asset, Swiss-based generic drugs maker Actavis, which he bought in 2007 for €4.7bn, may already be largely lost. Deutsche Bank now states that it is able to exert “significant influence” over this business following a punishing refinancing of the debt-laden firm. Significantly, the German bank’s interest in Actavis is now treated as an investment rather than a loan.
Many victims of the Icesave affair would dearly like to know the details of the backroom deal in Reykjavík between Landsbankí administrators and Thor – not least because of serious questions about the relationship between his business empire and the bank in the months before the collapse. Concerns raised in the parliamentary report, which runs to more than 3,200 pages, include allegations that:
■ In the summer and autumn of 2008 Thor’s business empire appeared to be in a “difficult” situation after taking on €4.4bn of borrowings to acquire Actavis in a highly leveraged deal one year earlier. Despite this, loan exposure to Thor continued to grow.
■ Landsbankí’s foreign currency loan exposure to Thor companies increased at a time when it was straining to retain enough reserves to deal with Icesave and other foreign currency obligations.
■ Loan exposure of almost €1bn to Thor companies when the bank fell were equivalent to about 37.2% of Landsbankí’s capital base – far exceeding the 25% legal limit concerning large exposures.
Thor disputes all the allegations as incorrect or misleadingly incomplete. “The commission writes at length about how the rules should have been, or how they should have been interpreted at the time,” said a Thor spokeswoman. “That hindsight does not amount to any rules having been broken.”
The affairs of another failed Icelandic bank, Kaupthing, which also took billions of pounds in deposits in the UK and also stands accused of having a questionable relationship with its largest shareholder are now the subject of an investigation by the Serious Fraud Office. While British fraud investigators are known to have gathered intelligence on several other collapsed Icelandic banks, including Landsbankí, there is no suggestion that they are pursuing inquiries in relation to Icesave, Landsbankí or Thor.
A spokeswoman for Thor said: “Icesave was never the monster it was made out to be… Thor [has said] Landsbankí assets would fully cover the claims.”
Landsbankí administrators paint a more nuanced picture. They are hopeful that priority creditors, including the UK Treasury, will eventually recoup much or all of their losses, but without interest. Non-priority creditors, including many UK universities, pension funds and councils, can expect to get little or nothing.
• The following correction was published on 4 September 2011:
A profile of the Icelandic billionaire Thor Björgólfsson referred to his plan for a super yacht known as Project Mars, as a play on his thunder god name. To clarify: Thor is the hammer-wielding Norse god of thunder. His nearest Roman equivalent is the thunderbolt-wielding Jupiter, rather than Mars, the Roman god of war.
Footnote: This article has been amended to reflect the fact that the correct figure for the loan exposure of the Landsbanki group to Thor-linked companies, expressed as a proportion of the bank’s capital base, is 37.2% (still far in excess of the legal limit of 25%). The previous figure of 70% equated the loans to a proportion of the bank’s equity not capital base.