One of the Ireland's most iconic department stores could be sold for as little as €1 as part of efforts to restructure its crippling debts, the Irish Independent has learned.
Anglo Irish Bank and Ulster Bank -- Arnotts' effective new owners, who are owed €300m by the retailer -- agreed earlier this year they could buy out all the shares in the landmark store for a nominal sum, believed to be as little as €1.
This would wipe out the shareholding of senior counsel Richard Nesbitt and his family, as well as funding partner Boundary Capital -- led by financier Niall McFadden.
The shareholding remains intact for now, sources close to Arnotts said last night.
However, this could all change next month pending EU approval for the lenders to take "joint control" of Arnotts.
Once the nominal payment is made, the banks are then free to rebuild the company with a view to selling it on to recoup their debts.
Arnotts, badly hit by the recession, owes nationalised Anglo Irish Bank over €150m, while Ulster Bank, which is not covered by the 2008 banking guarantee, holds the remainder of the company's debt.
Arnotts attempted to assure its almost 1,000 workers yesterday their jobs are "secure".
As first reported in yesterday's Irish Independent, the two banks have notified the EU they plan to take control of Arnotts.
Arnotts executive and board members yesterday discussed the troubled store's future in a series of high-level meetings. Many of them may not survive a series of changes planned by the banks and their advisers.
Radical changes to the board and management of Arnotts are imminent as the shop is told by the banks to simply concentrate on retailing, not property development.
As part of the corporate review, Arnotts has been told that its ambitious plans for a €750m 'Northern Quarter' may now have to be abandoned, even though officially it is due to go ahead in 2011.
The long-term plan of the two banks is to rebuild the retailer and restore its profits and ultimately sell it off to an international trade buyer.
The banks have installed American private equity firm Paladin Capital, who are now calling the shots at the company, leading to tensions among executives and board members.
Arnotts last night refused to comment on the banks' options. However, sources said the shareholding could change immediately pending EU approval.
Anglo has sought permission from the EU to advance the move under European rules. A deadline of August 9 has been set for any objections to the takeover.
If approved by the EU, state-owned Anglo -- which failed in its bid to inject up to €750m of capital into the beleaguered Quinn Group -- would consolidate more than 50pc of Arnotts' mammoth debts on to its loan book.
Arnotts Holdings Ltd yesterday confirmed it is working with Anglo and Ulster Bank as part of the ongoing process to restructure the group's financing.
"Arnotts strongly emphasises that trading continues as normal," said a spokesperson for the group.
"Arnotts is performing very strongly, with trading for the first half of the year ahead of the market. Jobs within Arnotts remain secure and Arnotts continues to invest in the future of the store. We would like to reassure our customers that it is business as usual at Arnotts."
Arnotts employs more than 900 staff at its landmark store on Henry Street in Dublin and under 100 between its subsidiary, Boyers and Co, on Talbot Street, and another outlet in Stillorgan.
Labour TD for Dublin Central Joe Costello called for a business plan to secure the future of the store, its workers and nearby businesses.
"Anglo, which is now owned by the State, must resist the temptation to offload Arnotts at a fire-sale price just to make some short-term gain," he said.
"Arnotts has been an integral part of the retail landscape in the capital since 1843 and it would be unthinkable if this development led to a situation where the future of the store itself was in question."