Daunt dismisses Russian bank link to Waterstones

Waterstones managing director James Daunt has moved to dismiss any suggestion that a Russian bank collapse will impact on the future ownership of the retail chain, saying that the situation is of “no interest or concern” to the business.

At the same time, he has suggested the bookseller’s Russian owner, Alexander Mamut, would be “sensible” to sell the retailer now it is making a profit.

The London Evening Standard reported on Wednesday (25th October) that Waterstones’ ownership might be affected by the bailing out of Russia’s largest private bank Otkritie, of which Mamut was a large shareholder. The newspaper suggested that its new owners the Russian Central Bank were asking oligarch shareholders to hand over assets to help it recuperate losses of between $3.3bn and $6.5bn.

According to the Standard, the retailer borrowed $57m in  2012 and $50m in 2015 from a Cyprus bank called the Russian Commercial Bank, which until a few weeks ago was 20% owned by Otkritie. Mamut owns Waterstones through its Lynwood investment company, also based in Cyprus, and accounts show Waterstones currently owes that company £138.7m and paid it £9.7m in interest.

However speaking to The Bookseller, Daunt completely dismissed the report and stressed that there is no link between Waterstones and Otkritie.

“Waterstones does not borrow from Otkritie Bank - the rescue of the bank is of no interest or concern to Waterstones as it has no connection to the bank,” he said.

He also expressed bemusement as to why a potential sale of the retailer would cause any concern, suggesting that a sale of the business was likely one day because of the nature of how investors like Mamut operate.

“If Mr Mamut does sell Waterstones, this would simply be testament to his good sense in buying the business in 2011,” Daunt said. He added: “That he will do so for a good profit will no doubt cause him some cheer.”

Waterstones returned to profit for the first time in five years under Mamut’s ownership earlier this year, turning over £409.1m in the year to 30th April 2016, and achieving an operating profit of £18.8m, resulting in a pretax profit of £9.9m.

Daunt confirmed the retailer had hired Rothschild to look at conventional funding in the UK and said when Mamut bought it in 2011 it had been forced to go to elsewhere for lending because at the time UK banks would not lend.

Rothschild’s mandate meant Waterstones intends to replace existing debt from the Russian Commercial Bank with a facility provided by UK lenders, he said. “This reflects the profitability and stability of the business,” he added.

Mamut bought Waterstones from the HMV Group for £53m in 2011, instantly hiring Daunt as m.d. Before the sale, publishers had been concerned that the chain’s potential collapse could devastate the industry.