Banks Take Over Arnotts

For 167 years, Arnotts has been a fixture on Henry Street for Dublin's shoppers.

It is to Dublin, what Macys is to New York or Harrods to London - and it's seen it all.

It's survived the Great Famine, the Easter Rising, the War of Independence, two world wars and countless economic ups and downs.

But the recent horrific property collapse and banking crisis in Ireland could see it lost for good.

Two banks - the state-owned Anglo Irish Bank and Ulster Bank - are now taking joint control of the department store, which has been unable to service crippling debts of up to €300m.

And behind those debts: a familiar story of hubris, property speculation and crazy lending.

At the height of the boom, Arnotts announced ambitious plans to create a new "Northern Quarter" around Dublin's O'Connell and Henry Streets.

The 5.5 acres site surrounding the GPO was to contain 47 shops, 14 cafes, restaurants, bars, around 175 apartments and a four-star hotel.

The redevelopment was to cost €750m - and the two banks, Anglo and Ulster, were its backers.

The project is now on hold following the property collapse.

Arnotts also invested €10m in a new trendy store in the Jervis Shopping centre called Arnotts Project, which was to house the department store while the new Northern Quarter was being built.

That store closed down this year and the company paid €5m to break the lease.

The irony is that the store is trading well - ahead of most other retailers - despite being affected by the financial downturn.

But any profits being made are still nowhere near enough to meet repayments on the massive amounts of money it has already drawn down from the two banks. For the moment, customers are unaffected.

Arnotts insists it is still open for "business as usual" and the jobs of the 950 staff working there are safe.

Because Anglo is now owned by the State, approval is required from the EU commission before the takeover can take place.

A deadline has been set for August 9th for any objections to be lodged. Anglo, which is receiving €22bn from taxpayers, is owed €150m, while Ulster Bank, which is not covered by the bank guarantee and is not taking part in the NAMA project, holds the remainder of the debt.

Radical changes to the management of the department store are expected - and the banks are likely to tell the board to concentrate on retailing, not property development.

The Northern Quarter project, currently on hold, may be abandoned altogether if the banks decide to cut their losses.

The two banks have enough on their plates running their own banking operations, and are unlikely to want to stay involved with a department store for very long.

So ultimately, the plan will be to sell the iconic store, possibly to an international buyer.

It'll be the first time since it opened in 1843 that Arnotts would have been put up for sale, and there are fears that a new buyer may not keep the brand alive.

Already, several familiar Irish names have disappeared from the high street - notably Roches Stores, which was bought out by British retailer Debenhams in recent years.

The extinction of a unique Arnotts brand would leave Henry Street looking and feeling like a standard British high street.

In an editorial The Irish Times said, if Arnotts goes, "an almost 200-year-old fragment of national individuality will disappear, another casualty of the poisonous legacy left behind by the excess of the boom years". Workers at the company are fearful for the future.

"The majority of our staff have more than 20 years of service," said John Douglas of the trade union Mandate, "The banks need to engage with the retail directors at Arnotts, and until they can give us sight of a plan for the future, I trust no-one on behalf of the staff."

Shoppers at the store said they would hate to see it close.

"It's part of who we are," said one, "You can go to any shopping centre in the world and you won't find an Arnotts. It can't close."

The store has been a part of life for generations of Irish shoppers - it was where they bought their communion dresses, and their wedding presents.

It survived countless changing fashion trends over the years.

It also has a unique place in Irish history.

Countess Markievicz is said to have kitted out some of her Citizens' Army in the uniform section, Padraig Pearse stopped to close his account at the store before taking up his position in the GPO for the Easter Rising.