Iceland’s Glitnir seeks protection from U.S. creditors

November 26 2008

Icelandic bank Glitnir banki hf sought bankruptcy protection on Wednesday from creditors in the United States.

The Reykjavik-based bank filed a Chapter 15 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York. The bank was taken over by Iceland’s Financial Supervisory Authority last month as the global financial crisis took its toll on the country.

The International Monetary Fund approved a $2.1 billion loan for Iceland on November 19.

According to court documents, Glitnir’s court-appointed overseer wants to have the company’s court proceedings in Iceland recognized in the United States.

The company said in the filing that it had more than $1 billion in assets, and liabilities of more than $1 billion.

Iceland’s three biggest banks, Kaupthing , Landsbanki and Glitnir, collapsed in October under the weight of billions of dollars of debt accumulated in an aggressive overseas expansion. The government moved to takeover the banks, but the financial collapse shattered the country’s currency and forced Iceland to seek aid from the IMF.

(Reporting by Emily Chasan and Jonathan Stempel)


Iceland to Pay ISK 245 Billion for Icesave?

November 27 2008

The net expenses that the Icelandic state has to cover because of deposits of Icelandic banks in foreign countries will amount to approximately ISK 245 billion (USD 1.8 billion, EUR 1.4 billion) according to a preliminary estimate by the International Monetary Fund (IMF).

While Prime Minister Geir H. Haarde and former majority owner of Landsbanki Björgólfur Gudmundsson have stated that the assets of the banks are likely to cover the deposits, the IMF does not appear to share their estimates. The IMF calculates that the assets of the Icelandic banks abroad will only cover about half of claims made by foreign states because of insured deposits, Fréttabladid reports.

According to IMF’s estimates, the gross expenses of the Icelandic state because of the deposits will amount to 47 percent of this year’s gross domestic produce (GDP). Assuming that the bank’s assets suffice for roughly half, around 19 percent will be the responsibility of Icelandic tax payers.

Iceland’s GDP in 2007 was more than ISK 1,293 billion (USD 9.2 billion, EUR 7.1 billion) according to numbers from Statistics Iceland.

Although it is unclear what this year’s GDP will be, the IMF expects Icelandic tax payers to be responsible for paying ISK 245 billion for foreign deposits, most of which are deposits in Landsbanki’s Icesave. However, Glitnir and Kaupthing banks also had deposits abroad.

That means that every Icelandic resident will be indebted by ISK 800,000 (USD 5,700, EUR 4,400) because of these deposits alone. To put these amounts in perspective, Fréttabladid states that ISK 245 billion would suffice to cover the operations of Iceland’s entire healthcare system for two years.

The newspaper was unable to receive comments from the resolution committees of the banks and Minister of Commerce and Banking Björgvin G. Sigurdsson.


Published in: on November 28, 2008 at 6:40 am  Comments Off on Iceland’s Glitnir seeks protection from U.S. creditors  
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