Distribution to Glitnir’s priority creditors

The Winding-up Board of Glitnir hf. announces that it intends to make a distribution to Glitnir’s priority creditors on Friday, 16 March 2012.

At a creditors’ meeting held in Reykjavik, Iceland on 31 January 2012 Glitnir’s Winding-up Board presented a proposal for payment to priority creditors that set out:

• the basis on which the Winding-up Board intends to make payments to priority creditors in Icelandic kroner (ISK), Euros, US dollars, pounds sterling, and Norwegian krona (including how the proportion of each currency has been determined);
• the exchange rates at which each non-ISK payment would be converted from ISK;
• the arrangements for each disputed priority claim to be paid into escrow accounts pending resolution of the dispute; and
• the conditions to be met for payment to creditors with undisputed priority claims, including the requirement for an undertaking to Glitnir to return over-payments. 

Under Icelandic insolvency law, creditors of Glitnir could object to the proposed distribution.  A number of objections were received.  Some were determined as invalid by the Winding-up Board, and those creditors were notified of this.  All other objections by creditors have been withdrawn following meetings with Glitnir’s Winding-up Board.  The distribution proposal can now, therefore, be implemented.

The Winding-up Board intends to make payments direct to priority creditors and to special escrow accounts set up for the distribution on Friday, 16 March 2012.  Thereafter the Winding-up Board expects to make monthly payments from the escrow accounts to priority creditors as claims become unconditionally agreed and creditors satisfy the conditions for the release of funds from the escrow accounts.

On 13 March 2012 the Icelandic parliament passed law No. 17/2012.  This altered Iceland’s currency control restrictions, introducing special provisions applicable to ISK payments to non-Icelandic parties.  Consent from the Icelandic Central Bank for the payment to priority creditors of the ISK element of the distribution will be required under this new law.  Accordingly, the entire ISK part of the distribution will be paid to the escrow account denominated in ISK pending clearance from the Icelandic Central Bank.

Wholesale deposit claims

Fifty-three public authorities in the United Kingdom, including certain local government bodies and universities, had wholesale deposits with Glitnir in October 2008.  They contended that they were entitled to priority for these deposits under article 112 of the Icelandic Act on Bankruptcy.  Whether they were correct was the subject of litigation in Iceland. 

On 1 April 2011 the Reykjavik District Court handed down its judgement on specimen claims brought by certain wholesale depositors of Glitnir.  The District Court held that wholesale depositors did have priority status.  This was confirmed by the Icelandic Supreme Court on 28 November 2011. Settlements based on the decision of the Supreme Court have been reached with all other wholesale depositors with Glitnir.

Currencies of Payment

All claims against Glitnir have been denominated in ISK since 22 April 2009, having been converted from the original claim currency using the Icelandic Central Bank selling rates on that date. The Winding-up Board has proposed that the distribution to priority creditors will be made in a basket of currencies using the same rates.  The distribution currencies are Icelandic kroner, Euros, US dollars, pounds sterling, and Norwegian krona. The weightings for the distribution currencies have been determined based on the currencies of the adjusted assets held by Glitnir as at 30 September 2011. The total amount of the priority claims which are being fully paid though this distribution is ISK 105.6 billion (approximately EUR 635 million at current exchange rates).