US group Palladin lines up bid for IBRC’s loans with department store Arnotts

Boston-based investment group ran Henry Street store for the past three years


Boston-based investment group Palladin Capital is planning to bid for the loans in department store Arnotts that will shortly be put up for sale by the special liquidators of the Irish Bank Resolution Corporation.

Mark Schwartz, chief executive of Palladin, told The Irish Times yesterday that his group would also be interested in buying Ulster Bank's Arnotts loans.

Palladin’s three-year contract to run Arnotts on behalf of the banks expired at the end of March. Mr Schwartz was chairman during the period, when the fortunes of the retailer were turned around.

He is now keen to renew its association with Arnotts as an owner rather than an operator.

“Palladin is interested in buying the loans of IBRC and all of the debt or we would be willing to just buy the IBRC debt,” he said. “[Over the past three years] we’ve put in place a strong management team and we’re interested in continuing to work with them as owners not as advisers.”

Arnotts has borrowings of about €315 million with IBRC and Ulster Bank. IBRC holds just more than half of those loans.


Retail development
The banks took control of the business in 2010 and scrapped the proposed €750 million Northern Quarter retail development that had been planned by Arnotts previous chairman Richard Nesbitt.

Mr Schwartz declined to say how much Palladin might be prepared to pay except that it would not be the par value.

Palladin has a buyout fund that it says has the headroom to acquire Arnotts. It is currently in the final stages of buying two businesses – a 70-store retailer and a women’s sportswear brand. The deals are expected to close within the next month.

Arnotts has not published accounts since the year to the end of January 2011 when its operating losses from continuing operations narrowed by 28 per cent to €6.6 million.

Mr Schwartz said trading has stabilised further since that point and estimated that sales would grow this year.

“Someone has to take a longer-term view of buying Arnotts,” he said. “It should be the leading shopping destination in Dublin with expansion opportunities throughout Ireland.”


Acquiring loans
When asked if Palladin has spoken to IBRC about acquiring the loans, Mr Schwartz said: "We've made our interest known."

The liquidators – Kieran Wallace and Eamonn Richardson of KPMG – have been mandated by the Government to value the various IBRC loans and to seek to sell them on the market.

UBS and PwC have been engaged by the liquidators to value the various loans.

Any residual loans not sold are due to be transferred to the National Asset Management Agency in August.

Mr Schwartz said Palladin would be “long-term holders” of Arnotts if it were to gain control of the company. “We are operators, we are not distressed debt buyers,” he said.

Mr Schwartz said Palladin had achieved what it had been hired to do at Arnotts by renovating the store, strengthening the management team and repositioning the retailer with a variety of new brands.

He said the uncertainty about the company’s future was not helpul for Arnotts and that it would be in the “best interests of the business for a quick decision to be made” on its future.

Last weekend, UK retailers John Lewis and Selfridges and restructuring group Hilco were reported to have expressed an interest in acquiring Arnotts.