Page last updated at 10:18 GMT, Saturday, 13 September 2008 11:18 UK

XL's West Ham connection

By Nils Blythe
BBC Business correspondent

XL sponsorship West Ham shirt
XL signed a three-year deal with West Ham last February

When West Ham's players step out to play West Brom in the Premiership, they will do so in shirts carrying no sponsor's name, following the collapse of XL Holidays midway through a three-year 7.5m contract.

The Hammers have also suspended all sales of replica shirts and have started work to remove all XL branding from their Upton Park ground.

The club's Icelandic chairman Bjorgolfur Gudmundsson has a long connection with XL, and the failure of the holiday group which has collapsed leaving tens of thousands stranded could end up costing the Gudmundsson family up to 200m. A big hit, even for people who are very wealthy by any standards.

Until 2006, much of the business which became the holiday group XL was owned by an Icelandic company controlled by Bjorgolfur Gudmundsson and his son Thor Bjorgolfsson.

Family connections

The son's business interests are even more extensive than the father's, and there are close connections between them.

In 2006 the XL travel business was sold to a buyout group led by Philip Wyatt.

But the purchase was largely funded by a loan from the Icelandic bank Landsbanki, which is controlled and part-owned by the Gudmundsson family.

Another Gudmundsson controlled company - Eimskip - guaranteed 207m euros (164m) of the loan.

So, effectively, the Gudmundsson family sold their travel business, but provided much of the finance for the purchasers.

Further support for XL came in the form of a loan of 45m euros (35m) from Straumur, a bank controlled Thor Bjorgolfsson.

Earlier this week a group led by the Gudmundssons said that they would take liability for the financial guarantee given to XL.

On the face of it, this is a baffling transaction.

New sponsor

With XL on the brink of collapse why would businessmen who were well aware of the position offer this kind of guarantee?

The answer, according to sources familiar with the deal, is that they feared that the guarantee would push their company Eimskip to the brink. So they decided to take the loss privately.

But the move illustrates how closely connected the Gudmundssons were to the fortunes of the XL group.

The total loss from XL to Bjorgolfur Gudmunsson - the West Ham owner - and his son could reach 252m euros (199m).

However sources close to the family estimate their overall wealth at well over 2bn.

West Ham fans will be hoping that this business setback does not prevent the club's owner from continuing to invest in the football club.

The club is now looking for a new sponsor.

The supporters are wondering what to do with replica shirts which have XL.com emblazoned across them.


SEE ALSO
West Ham end shirt sponsor deal
12 Sep 08 |  West Ham
Q&A: Options for XL passengers
12 Sep 08 |  Business
Thousands stranded by XL collapse
12 Sep 08 |  Business
End of big spending at West Ham
09 May 08 |  West Ham

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