Glitnir settles remaining debt to the Central Bank of Luxembourg

22.11.2011

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Glitnir and the Central Bank of Luxembourg (BCL) jointly announced today that Glitnir’s remaining debt owed to BCL has been paid in full. This marks a major milestone in the restructuring of the Luxembourg subsidiary of the collapsed Icelandic bank.

The Luxembourg subsidiary of Glitnir had in March 2009 gone through a successful restructuring and settlement of its interbank debt and depositors’ base. At that time the BCL remained its sole creditor, with an outstanding balance in excess of EUR 1 billion, collateralized by a substantial pool of assets pledged in its favour.

The agreement reached between the parties in March 2009 secured important interests of Glitnir and its stakeholders, enabled an orderly restructuring and workout to take place over a five year period and resulted in the voluntary liquidation of the Luxembourg subsidiary. The agreement also allowed securitized loan portfolios, which were pledged to BCL, and which included loans to Glitnir’s Icelandic customers, to continue to be administered by Glitnir’s Resolutions Committee in Iceland. In addition the agreement ensured that all proceeds from Glitnir Luxembourg’s European real estate loan portfolio would be used in full to repay the BCL debt.

This milestone has now been reached more than two years ahead of the agreed payment schedule, originally estimated to close at year end 2013. The collateral base has proved to be stronger and more liquid than originally estimated.

Says Yves Mersch, Governor of the Central Bank of Luxembourg: “The full and final settlement of Glitnir Luxembourg’s debt towards BCL, two years ahead of time, proves that we were right to engage into a negotiated work out agreement, which was based on firm principles and strong commitments from all parties. This agreement safeguarded the interests of BCL, the Eurosystem, and of Glitnir Luxembourg’s depositors, creditors, and shareholders, and led to an excellent outcome that stands for the diligence and professionalism of all the involved parties.”

Glitnir’s Luxembourg subsidiary halted its banking operations in October 2008, in the wake of the collapse of its parent company, and set out a restructuring plan approved by all creditors in March 2009. The restructuring efforts, headed by KPMG Luxembourg and the bank’s management team, was carried out in a constructive and close cooperation with the Resolutions Committee of its parent company and BCL. This outcome fully settles Glitnir Luxembourg’s debts towards the local and international community.

Says Eric Collard, Liquidator of Glitnir Luxembourg: “This brings to an end a very successful restructuring effort that started in early October 2008 and means that all depositors, interbank liabilities and trade creditors have been settled in full. The continuing task will be to maximize and eventually recover the remaining part of the outstanding assets and that work is going according to plan. Even in the most challenging circumstances there can be solutions which overcome predicted negative outcomes. This exceptional result was made possible since we concentrated on common sense and managed to bring the best out of the individuals involved at BCL and Glitnir’s Resolution Committee, with a full support of Glitnir’s Management team in Luxembourg.”

The most significant remaining assets of Glitnir Luxembourg, in addition to the securitized loan portfolios, comprise loans to real estate investors in Europe, as well as direct ownership of real estate in several European markets. These assets will contribute to the overall recovery of the creditor’s mass of Glitnir in Iceland.

Says Kristján Óskarsson, CEO Glitnir Iceland; “We at Glitnir would like to express our gratitude for the positive co-operation of the Central Bank of Luxembourg in this matter. The agreement concluded between the parties in 2009 enabled Glitnir Luxembourg to work its way out of a very constrained position. The agreement meant that full settlement could be be achieved with all creditors in Luxembourg, and about EUR 1.3 billion was added to the funds recovered by the parent company's creditors, which might otherwise have been lost. This agreement was also very significant for the economy of Iceland, as it ensured that loans to Icelandic corporations, included in the loan portfolios pledged to the Central Bank, were not disposed of on the market with unpredictable consequences.”

Glitnir Luxembourg has been advised by Reviva Capital S.A., a specialised asset manager based in Luxembourg. BCL has been advised by AgFe, a UK based advisory firm.

Glitnir 2011