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Half of Iceland’s Icesave Debt Repaid

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Half of Iceland’s Icesave Debt Repaid

icesave-logoThe new Landsbanki paid the bankruptcy estate of the old bank ISK 73 billion (USD 580 million, EUR 461 million) in foreign currencies last week. According to Fréttablaðið’s sources, the amount will soon be paid out to the bank’s priority claimants, after which half of the Icesave debt will have been compensated.

When payments from the new Landsbanki for the assets obtained from the old bank were agreed upon, indexed commercial papers that could increase in consistency with the value of assets were issued.

The repayments of the commercial papers, which worth were estimated at ISK 290 billion (USD 2.3 billion, EUR 1.8 billion) at the end of March, were supposed to begin in January 2014 and continue through October 2018.

Last week it was agreed that the new Landsbanki would pay a quarter of the commercial papers, ISK 73 billion, immediately, and thereby postpone the first maturity date until April 2015. The amount was paid in euros, pounds and dollars.

This will save the bank considerable cost of capital, as the interests of the commercial papers were significantly higher than the yield obtained for foreign liquid funds.

The amount will allegedly be paid out to the claimants of the old Landsbanki shortly and will thus be added to the ISK 594 billion that were already paid out to them in December 2011.

The bankruptcy estate of Landsbanki will at that point have paid more than 50 percent of its priority claims, a total of ISK 1.323 billion (USD 10.5 billion, EUR 8.4 billion), including claims made by the deposit insurance funds in the UK and the Netherlands.

Deposits in Icesave, Landsbanki’s branch in these countries, account for 86 percent of this amount.

The Icelandic Deposit Insurance Fund (TIF) is responsible for ISK 674 billion, approximately half of all agreed priority claims.

The payment the Landsbanki bankruptcy estate is expected to make in the coming weeks is almost as high as the amount TIF is responsible for.

According to an estimate of the value of the bank’s assets made by Landsbanki’s winding-up committee in March 2012, the bankruptcy estate will be able to cover all priority claims and have ISK 122 billion in excess to pay general claimants.

Click here to read more about the Icesave dispute, which will be heard before the EFTA Court next autumn.

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