Landsbanki’s Loans Earmarked for Icesave Repayment

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Landsbanki’s Loans Earmarked for Icesave Repayment

The Icelandic government has earmarked loans Landsbanki has granted to its customers and are to be repaid in the next seven years to repay Icesave deposits. The loans are worth ISK 662 billion (USD 5.2 billion, EUR 3.7 billion), more than half of the bank’s assets.

The headquarters of Landsbanki in Reykjavík. Copyright: Icelandic Photo Agency.

The resolution committee of the old Landsbanki estimates that its assets—after taking losses following the banking collapse into account—will be worth ISK 1,195 billion (USD 9.3 billion, EUR 6.7 billion) after seven years, Morgunbladid reports.

While more than half of these assets are loans granted to Landsbanki’s customers, most of the remaining assets are financial instruments with a maturity date in the next seven years.

Additionally, it is expected that the new Landsbanki (NBI) will pay ISK 284 billion (USD 2.2 billion, EUR 1.6 billion) to the old Landsbanki after accounts for transferred assets have been settled.

The agreement reached among Icelandic, Dutch and British authorities on Icesave last weekend, assumes that the loan granted to the Icelandic state to cover the Icesave deposits will be interest-only for the next seven years.

According to Fréttabladid, the Landsbanki subsidiary in London lent at least ISK 130 billion (USD 1.0 billion, EUR 730 million) to Icelandic companies involved in the so-called “outvasion”—investments in foreign markets.

The highest loans were granted to Novator Pharma, which is owned by Björgólfur Thor Björgólfsson, and companies related to Baugur, as revealed in the Stöd 2 news program yesterday evening.

While the majority of loans granted by Landsbanki in London went to foreign companies, 18 percent of these loans went to Icelandic companies.

However, individual loans to Icelandic companies were much larger than individual loans granted to foreign companies.

Novator, for example, was granted a loan of GBP 205 million (USD 327 million, EUR 235 million), while the highest individual loan to a foreign company amounted to GBP 58 million (USD 92 million, EUR 66 million).

Novator took the loan to finance the takeover of Actavis, which then repays it. Novator’s outstanding debt to Landsbanki amounts to around ISK 40 billion (USD 310 million, EUR 220 million) and that of Baugur and related companies to ISK 58 billion (USD 450 million, EUR 320 million).

According to Fréttabladid’s sources from within Landsbanki, all of Baugur’s and Novator’s best assets were used as collateral for the loans in question.

Click here to read more about Icesave.