Russian bank collapse raises questions for Waterstones

Waterstones’ future ownership is said to be in doubt after the collapse of Russia's biggest private bank Otkritie, of which the chain’s owner Alexander Mamut was a major shareholder. 

Otkritie was recently bailed out by the Russian Central Bank and the London Evening Standard has reported that it is asking oligarch shareholders to hand over assets to help it recuperate losses of between $3.3bn and $6.5bn. Although there is no direct link between Otkritie and Waterstones, the newspaper says this could put the bookseller’s ownership at risk.

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.

Waterstones managing director James Daunt downplayed the situation. “I am certain that Waterstones has no obligations of any sort to Otkritie,” he told the Standard, adding he was “completely confident” that Waterstones would be unharmed by the issue.

However, he did confirm the retailer had hired Rothschild to look at conventional funding in the UK and said that it had been forced to go to elsewhere for lending because at the time UK banks would not lend.

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.

However, Daunt told The Bookseller in 2015 the chain must sustain three years of consecutive profit-making before the company can “stand on its own two feet”. Daunt said at the time: “We still need to become a much more stable business. It is currently reliant on its owner for its continued existence and that is not at all what we aspire to be in the position of. We should not be reliant on someone’s charity. We need to get our business into a position where it can be independent of that.”

Daunt has not yet responded to requests for comment on the Otkritie situation from The Bookseller.

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.