Iceland is planning to sell six-year euro-denominated bonds to shore up foreign exchange coffers as the government prepares to start phasing out capital controls in place since the country’s economic collapse in 2008.
The north Atlantic island hired Barclays Plc, Citigroup Inc., Deutsche Bank AG and JPMorgan Chase & Co. to handle the sale, according to a person familiar with the matter who asked not be identified. The initial price talk on the debt is about 190 basis points over the mid-swap rate, the person said.
Iceland has since its financial collapse in 2008 sold two separate $1 billion U.S. dollar-denominated bonds in 2011 and 2012. The country completed a 33-month International Monetary Fund program in August 2011 and has relied on capital controls since 2008 when the failure of its three largest banks sent the island’s currency into a tailspin.
Iceland still owes $1.8 billion to the Washington-IMF, Nordic governments and Poland of the $4.6 billion it borrowed following the failure of Kaupthing Bank hf, Glitnir Bank hf and Landsbanki Islands hf. The IMF loans are due in 2015 and 2016, while the Nordic loans mature from 2019 through 2021.
The island is recruiting advisers to help start a dialogue with the creditors in the failed banks, which are sitting on trapped assets of about $7.2 billion. Finance Minister Bjarni Benediktsson said in June that the government will probably force a solution this year if the creditors, many of which are hedge funds, fail to come with a viable plan on how to wind up the banks which defaulted on $85 billion.
The $16 billion economy has recovered faster from its financial collapse than Sedlabanki has estimated. The krona has climbed almost 7 percent from a low in October as the bank intervened. The economy is seen growing 2.8 percent in 2014 and 3.2 percent in 2015, according to the European Commission. That compares with the growth totaling 1.6 percent among the bloc’s 28 member states in 2014 and 2 percent in 2015.
Benediktsson declined to immediately comment today.
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