Íslandsbanki hf. and Glitnir hf. Come to Heads of Agreement Regarding the Re-Capitalization of Íslandsbanki hf.

16.07.2015 - IR Releases

Íslandsbanki hf., Glitnir hf., ISB Holding ehf. and GLB Holding ehf. have entered into Heads of Agreement under which they agree to co-operate in order to facilitate the composition of Glitnir.

On 8 June 2015, the Icelandic Ministry of Finance and Economic Affairs announced the terms of a proposal made by certain of Glitnir's creditors (the "Creditors' Proposal") which the Task Force on the Liberalization of Capital Controls in Iceland has confirmed is consistent with the framework for analysing and addressing the balance of payments implications of domestic assets held in winding-up estates and recommends that the Central Bank of Iceland grant the necessary exemptions from the Act on Foreign Exchange no. 87/1992 to enable Glitnir to proceed with a composition on the basis of the Creditors Proposal (the "Composition")

The Creditors' Proposal requires the following steps to be taken by, or in relation to, Íslandsbanki
  • Reduction of Íslandsbanki's current equity from 28.4% down to 23% capital level; 
    • Íslandsbanki issuing equivalent to approximately ISK 16bn in foreign currency subordinated Tier 2 capital and/or additional Tier 1 capital to Glitnir, at market terms with a minimum tenor of 10 years.
    • Íslandsbanki issuing approximately ISK 36bn bond to Glitnir, at market terms with a tenor of 10 years.
    • Íslandsbanki paying approximately ISK 3bn dividend out to the shareholder, Icelandic State Financial Investments.
  • Tier 2; Íslandsbanki issuing new Tier 2 note to Glitnir replacing the existing Tier 2 note denominated in EUR at market terms with a minimum tenor of 10 years.
  • ISK deposit term out; Íslandsbanki issuing ISK denominated bonds to Glitnir in an aggregate principal amount equal to deposits held by Glitnir in ISK with Íslandsbanki, at market terms with a tenor of 10 years.
  • MTN programme; Íslandsbanki issuing notes equivalent to approximately ISK 37bn under the Bank's MTN program to replace deposits held by Glitnir in foreign currency with Icelandic banks and approximately a further ISK 3bn under the same program upon subscription and payment for such notes with the proceeds of realisation of Glitnir's remaining assets situated in Iceland which are received in foreign currency. The notes will be issued in tranches with a minimum tenor of 7 years at market terms.
  • The amounts issued will be adjusted to reflect the deposits held by Glitnir in foreign currency with Icelandic banks at the time of the Composition.
  • Transfer restrictions; Íslandsbanki's shares will be subject to certain transfer restrictions, whereby a sale of the shares to Icelandic investors will be restricted.
The Heads of Agreement is conditional upon all necessary consents and exemptions from the relevant parties, including the Icelandic Financial Supervisory Authority and the Central Bank of Iceland.

The Ministry of Finance and Economic Affairs' announcement regarding Capital Control Liberalisation (Glitnir) can be found at the link below: http://www.ministryoffinance.is/news/nr/19598

The Ministry of Finance and Economic Affairs' announcement in relation to the adoption of Legislation on Stability Levy can be found at the link below: http://www.ministryoffinance.is/news/nr/19712

Birna Einarsdóttir, CEO of Íslandsbanki:

"Íslandsbanki's capital and liquidity ratios will remain very strong after the execution of the steps above and will, going forward, leave the bank in a strong position to service its customers. The parties have agreed on full cooperation in order to facilitate the successful performance of the Heads of Agreement."

For further information:
  • Investor Relations - Guðbjörg Birna Björnsdóttir, ir@islandsbanki.is, tel: +354 440 4752.
  • Media Relations - Dögg Hjaltalín, pr@islandsbanki.is, tel: +354 844 3925.

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