Landsbankinn and LBI reach an agreement on amendments of the terms of the bonds
Mr. Steinthor Palsson, CEO of Landsbankinn and Kristinn Bjarnason head of the Winding up Board of LBI hf. sign the agreement on March 8 2014.
Landsbankinn and the Winding up Board of LBI have reached an agreement on amendments to the bonds of December 2009, with a total outstanding balance equivalent to approximately 226 billion Icelandic Krona (ISK). The agreement is conditional upon the Winding up Board of LBI obtaining certain exemptions from the capital controls.
The final maturity will be extended from October 2018 to October 2026 with bond tranches maturing every second year throughout the period. Landsbankinn has an option to make prepayments of the bonds without any additional costs.
Interest rates will remain unchanged at 2.9% margin until October 2018. Thereafter, the margin steps up to 3.5% for the 2020 maturity, increasing up to 4.05% for the 2026 maturity. Each of the maturities between 2020 and 2026 will be equivalent to approximately 30 billion ISK.
Steinthor Palsson, CEO of Landsbankinn says: “This agreement puts the bank in a good position to meet the repayment obligations under the amended bonds and facilitates access to international debt capital markets. Specific restrictions on dividend payments have also been removed, enhancing shareholder value. Moreover, the agreement will significantly improve Iceland’s balance of payments and pave the way for easing of the capital controls. We therefore consider this to be a significant step in the development of both the Icelandic economy and Landsbankinn.”
Initially, the bonds were issued on the basis of decisions of the Icelandic Financial Supervisory Authority in accordance with provisions of the Emergency Act from 2008. The Principal amount of the bonds was compensation for the net assets and liabilities transferred to Landsbankinn.
It is expected that final documentation will be finalised in the coming weeks.