Agreement between Landsbankinn and LBI to amend bond terms enters into force
On 8 May 2014, Landsbankinn hf. and the Winding-up Board of LBI hf. reached an agreement on amendments to the settlement bonds negotiated in December 2009. The Winding-up Board of LBI hf. made the agreement conditional on receiving certain exemptions, in accordance with the Foreign Exchange Act.
The Winding-up Board of LBI hf. has today notified Landsbankinn that the authorities have approved the necessary exemptions and that the agreement has as a result entered into force.
The final payment from Landsbankinn to LBI hf. will now take place in October of 2026 instead of October 2018. The outstanding amount is paid in ten bonds maturing every second year, issued in GBP, USD and EUR. Landsbankinn is authorised to make full or partial prepayment, without cost, at any time during the term.
Landsbankinn and the Winding-up Board of LBI have also agreed on amendments that allow Landsbankinn, under certain circumstances, to postpone payment of the amounts maturing in 2018 and 2020. Furthermore, the minimum collateral requirement has been lowered from 125% to 115% of the outstanding amount at each time.
Interest rates will remain unchanged at a 2.9% margin until October 2018, stepping up to a 3.50% margin for the 2020 tranche to end at a 4.05% margin for the final maturity in 2026.
Each tranche maturing in 2016 to 2026 will amount to the equivalent of ISK 30 billion, with the exception of the 2018 tranche in the equivalent amount of ISK 40 billion. Upon entry into force of the agreement, Landsbankinn will pay the equivalent of ISK 30 billion and the outstanding amount on the bonds will subsequently equal ISK 196 billion.
Steinthór Pálsson, CEO of Landsbankinn: "This is excellent news for the Icelandic economy. This agreement represents an important step towards resolving national debt issues and lifting capital controls. The terms of the new bond are very manageable for Landsbankinn and the amendment will facilitate the Bank's efforts to secure financing on international markets, as we have previously stated. This agreement also abolishes special restrictions on dividend payments, for the benefit of the Bank's shareholders. This is an extremely important milestone for Landsbankinn, one we have worked tirelessly to achieve in recent years."
The bonds were issued based on decisions by the Financial Supervisory Authority, Iceland, in accordance with provisions of the Emergency Act. The amount was determined based on the difference between the value of assets and liabilities transferred to Landsbankinn.