A creditors' meeting was held by the Resolution Committee and Winding-up Board of Landsbanki Íslands (LBI) today, 19 May 2011.
List of claims - Disputes
At this creditors' meeting decisions by the Winding-up Board were presented on 1,505 claims lodged against the bank. This brings the total number of claims on which decisions have been taken to 10,657, of the approx. 12,000 claims lodged. The majority of claims discussed at this meeting concerned bonds issued and sold by LBI. Decisions were also explained concerning claims lodged by the Depositors' and Investors' Guarantee Fund.
The great majority of the 9,152 decisions presented at previous creditors' meetings are disputed. Meetings have been held to attempt to resolve disputes concerning 1,441 claims and 325 disputes have been referred to the courts for resolution.
The Reykjavík District Court has pronounced rulings in 18 of LBI's disputes. Of these 18 rulings, 17 have been appealed to the Supreme Court, which has now handed down verdicts in four of the cases. Among those cases where rulings have been pronounced are disputes concerning claims for wholesale deposits of UK and Dutch local authorities. The District Court upheld the decision by the Winding-up Board that wholesale deposits were considered deposits in the understanding of Act No. 98/1999, on Deposit Guarantees and an Investor Compensation Scheme, and that legal provisions giving priority to deposits had valid legal authority. Rulings have also been pronounced in disputes on the deposit claims of the UK and Dutch deposit guarantee funds in connection with Icesave deposits, with this outcome also upholding the Winding-up Board's decision. All of these rulings on deposit claims have been referred to the Supreme Court.
Five voiding actions have been brought, and a ruling has been pronounced by the District Court in one case upholding the voiding of a payment in connection with stock options in the autumn of 2008. Work is underway on bringing other actions for voiding and damages and can be expected to be filed this spring and this autumn.
Details of LBI's financial situation in Q1 of this year were presented to creditors at the meeting. Considerable success has been achieved in increasing the bank's recoveries, which rose over ISK 70 billion over the previous period. Expressed in foreign currencies, the increase over the previous period is equivalent to close to ISK 36 billion, while over ISK 33 billion is the result of currency movements. Based on a fixed ISK exchange rate as of 22 April 2009, recoveries are now estimated to amount to ISK 1300 billion, or the equivalent of 99% of the book value of priority claims (which are Icesave deposits and wholesale deposits) as of that same date. If recoveries are based on the ISK exchange rate on the quarterly reference dates, the estimated recovery is ISK 1,245 billion, as of the exchange rate on 31 March of this year, or around 94% of the book value of priority claims.
The positive trend has continued that cash is being acquired for the bank's assets more rapidly than estimated. As of 31 March this year, cash and cash equivalents amounted to ISK 408 billion. Cash held now amounts to around 1/3 of the book value of priority claims, estimated returns under the agreement with NBI hf. amount to another 1/3, and loans and other assets represent the final 1/3. The total cost of the winding-up proceedings continued to decrease during Q1 this year, declining by 6% over the previous quarter; on an annualised basis the decrease amounts to around 21%. The cost amounts to around 1/3 of the bank's interest and commission income in Q1. The total cost of LBI's winding up, from its commencement in April 2009 to 31 March 2011, is around 1.5% of the estimated gross value of assets and around 10% of the increase in the estimated increase in value of those assets during this period.
Other significant aspects of LBI's activities
In Q1 the Resolution Committee concluded the takeover of all pledged share capital in Iceland Foods Group Ltd. LBI now owns around 67% of the company's total share capital. A dividend paid by the company to LBI amounted to around ISK 13 billion. A decision was taken to engage two large international banks, UBS and Bank of America Merrill Lynch (BAML), to advise LBI on possible sale of its holding in Iceland Foods Group. The creditors' meeting was informed that, according to UBS and BAML, market conditions are currently favourable and it is therefore advisable to commence the sales process. In view thereof, the bank's Resolution Committee has decided to launch a formal sales process for the bank's holding in the company.
A formal sales process was recently begun for the bank's 66% holding in Aurum Group, which is comprised of the retail chains Mappin & Webb, Goldsmiths and Watches of Switzerland. Financial consultants Cavendish Corporate Finance in the UK were engaged as advisors for the sales process.