Business

Robert Tchenguiz: Borrower from Kaupthing and investor in Kaupthing

BBC business editor Robert Peston on arrests by the SFO

The first thing to say about the arrest of Robert and Vincent Tchenguiz by the Serious Fraud Office, in connection with its probe into the collapse of the big Icelandic bank, is that both men deny wrongdoing.

The second thing to say is that the relationship between Robert Tchenguiz and Kaupthing was pretty unusual, according to the formal investigation into the Icelandic banking crisis carried out by a commission set up by the Icelandic parliament.

The commission disclosed the following facts.

1) Robert Tchenguiz was given a loan facility of around €2bn (£1.7bn) from Kaupthing's parent company, a further €210m (£180m) from Kaupthing Bank Luxembourg and €95m (£82m) from Kaupthing Singer & Friedlander in the UK. So Kaupthing provided Robert Tchenguiz loan facilities of just over £2bn in total - a fair old chunk of change.

2) The commission says that "the big increase in loan facilities to (Robert) Tchenguiz from January 2007 until October 2008 is noteworthy, in light of the fact that in late 2007 many of Tchenguiz's companies started going downhill. The minutes of the loan committee of Kaupthing Bank's board state, inter alia, that fairly often the bank lent money to Tchenguiz in order for him to meet margin calls from other banks". Or to put it another way, Kaupthing lent Robert Tchenguiz money so that he could repay other banks, which wanted their money back.

3) Robert Tchenguiz "owned at least 1.5%" of Kaupthing Bank's shares in his own right. He was also an investor in and director of Exista, which was Kaupthing's biggest shareholder.

4) Robert Tchenquiz put up his shares in Kaupthing as "collateral for loans from that same bank". Which is highly unorthodox. It is not standard banking practice for a bank to lend money to someone with shares in that bank being provided as security against the borrower's inability to repay (it is a banking equivalent of one of Zeno's paradoxes).

So what do we conclude? Well it is clear that the relationship between Robert Tchenguiz and Kaupthing was deep and close.

You can keep up with the latest from business editor Robert Peston by visiting his blog on the BBC News website.

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