This crisis shows what lies in wait for the rest of the City
While Dawnay Day is no household name, the crisis that has engulfed the privately-owned investment giant in recent days will be remembered as a key milestone in the credit crunch.
A perfect microcosm of the unravelling of the great financial boom of the noughties, Dawnay’s woes are being followed especially closely by London’s huge Mayfair-based private equity and hedge fund industry, whose executives are rightly worried that they too could soon suffer Dawnay’s sorry fate.
Like many other privately owned investment firms, Dawnay Day and its owners made a killing in recent years, snapping up assets on the cheap. But with money now suddenly hard to come by, the wheels have spectacularly come off its business model, culminating in huge losses on an ill-fated investment in F&C, the fund managers.
Until recently, times had been great for Dawnay’s main owners. Guy Naggar, 67, the firm’s chairman, founded his property and financial services empire in the 1980s after buying a shell company from Rothschild.
The Frenchman soon brought on board his tax lawyer Peter Klimt. The two grew the company into a £2bn conglomerate with a further £3bn of assets under management. The company’s anonymous headquarters in Grosvenor Gardens house an extravagant art collection. It also has offices throughout Europe, India, the US, Middle East and Australia.
Naggar originally trained as a merchant banker with Samuel Montagu & Co and later became deputy chairman of Charterhouse. He is a director of dozens of companies, including chairman of Amberly Group and retailer Austin Reed, and a director of property vehicles Dawnay Day Carpathian and Dawnay Day Treveria as well as a director of Dawnay Shore Hotels.
In 1997 two companies at which Nagger held directorships, Dawnay Day Securities and Newletter Limited, both went into administrative receivership. Nagger and Klimt also own majority stakes in Dawnay Day Investment Banking, which was set up in May this year.
It received three bid offers last week, two from rival broking firms and one from private equity. Their majority stake in Dawnay Day Capital Markets is also being bought out by the management.
The group also earns fees from several listed property funds, which are preceded by the Dawnay Day name, such as Carpathian, Treveria and Sirus, all of which have suffered from the downturn in the European property market.
Klimt, 62, is chief executive of Dawnay Day and has been Naggar’s right hand man for more than 20 years. They first formed a joint venture property investment company together in 1989 and Klimt later joined the Dawnay board in 1992, with a mandate of developing the group’s property investment division and activities in India.
The group’s troubles could not come at a worse time for Klimt. Since March he has spent nearly all his time at his son’s bedside who is in a coma following a traffic accident in France.
A trained lawyer, Klimt is also a director of 283 companies, including chairman at Dawnay Day Property Investment Limited and of Dawnay, Day Structured Finance.
Staff at Dawnay will be told of their fate today; the rest of us will be watching closely.