Glitnir Creditors Back Composition Deal, Winding-Up Head Says

Glitnir Bank hf’s winding-up committee said creditors in the failed Icelandic lender support plans to strike a composition agreement and hand the bank over to its bondholders.

Once creditors have reviewed the proposed deal, “a meeting will be held with the creditors and if the creditors agree with the terms, the company will be formally handed over to them,” Steinunn Gudbjartsdottir, head of the bank’s winding-up committee, told Reykjavik-based Vidskiptabladid TV late yesterday. Though creditors have yet to give their formal approval for such a plan, the winding-up committee’s proposal “is supported” by the bank’s bondholders, she said.

Glitnir was the first of Iceland’s three biggest banks to fail four years ago, precipitating the collapse of the island’s financial system and sending the krona down as much as 80 percent against the euro offshore. Kaupthing Bank hf, Landsbanki Islands hf and Glitnir defaulted on $85 billion, compared with Iceland’s 2009 gross domestic product of $12 billion.

As of June 30, Glitnir’s assets stood at 862 billion kronur ($6.98 billion), according to the bank’s first-half report. The lender had liabilities of 2.5 trillion kronur. Glitnir’s bonds are trading at 25.5 cents on the euro, according to data available on the website of H.F. Verdbref.

“As soon as the composition agreement is approved, and if it is approved, creditors can expect to receive payments from the estate” of Glitnir, Gudbjartsdottir said.

Following the collapse of the three banks, Iceland’s government transferred domestic accounts to state-created lenders Arion Banki, Islandsbanki and Landsbankinn. Creditors in Kaupthing were subsequently handed an 87 percent stake in Arion, while creditors in Glitnir received a 95 percent stake in Islandsbanki. The government holds 81.33 percent in Landsbankinn, while its creditors own the rest.

Iceland’s government said yesterday it is seeking to pass a bill allowing it to sell its stakes in the three banks.

To contact the reporter on this story: Omar R. Valdimarsson in Reykjavik valdimarsson@bloomberg.net.

To contact the editor responsible for this story: Jonas Bergman at jbergman@bloomberg.net.

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