Assets worth thousands of billions ISK
The Assets of old Glitnir bank are counted in ISK thousands of billions, not hundreds of billions, according to Kristján Þórarinn Davíðsson, CEO of Glitnir Bank Inc. where twenty people are now working hard on liquidating the asset portfolio, created by the bank's split up to the Old and New Glitnir. The Old Glitnir is called, as before, Glitnir Bank Inc., and is pretty much a company in moratorium. No "regular" banking goes on there, and the employees are working hard to maximise its assets. "A kind person would describe this as a salvage rescue," says Kristján. "The emergency laws are created so that no claims can be made on the estate and no suits can be filed, i.e. to confirm a claim, even though the bank is in fact under a moratorium order," says Kristján.Resolution Committee to maximize the assets' worth
Doubtless many people think that Glitnir's operations were put to a complete halt, following the emergency laws and the separation of the bank into foreign and Icelandic parts. This is far from true. "If this were a regular bankruptcy a bankruptcy trustee would have been appointed who would then sell any assets on whatever price could be gotten at the time, and the estate settled. Here, however, a Resolution Committee was appointed which in fact does the job of a bankruptcy trustee, but is working on maximizing the asset's worth and therefore has a wider timeframe. We hope that by doing it this way we will get more out of it," says Kristján.A plan is being prepared on how much can be made out of Glitnir bank inc., but according to Davíðsson it will not be ready for some time. "However, we do know enough to be able to settle wage claims with all employees who lost their jobs in the collapse, apart from managing directors who according to law have a regular claim, not a priority claim", Kristján adds.
1-2 employees have been hired each week since the project commenced, and last week one new person was added as well. "And the plan is to hire at least two more this week", he says. "We have good people working very hard here, and the pressure on the people in the Resolution Committee has been almost inhumane at times." They are employees of Glitnir bank hf. and the people Kristján has hired are, for the most part, people who lost their jobs during the great collapse.
"We have been fortunate to get people who could adjust quickly to the task at hand because they knew the operations from before they lost their jobs due to the collapse," he says. In addition to those working for the bank in Iceland are some who work abroad. There is one employee in Canada, for example, one in China, one in Norway and four in Britain. "These are all former employees, around 20 people now, as well as foreign consultants who have been hired on a project basis, both for accounting and other work. They are all working very hard to save what can be saved," says Kristján.
Resolution Committee makes decisions
The job is in many cases complicated and the time it takes is most likely measured in years rather than months. The Resolution Committee consists of five people originally designated by the Financial Supervisory Authority in Iceland, under the leadership of Árni Tómasson.At first the Committee worked night and day to save as much valuables during the split up as possible, working all hours of the night. The members of the committee now meet every morning in the building that houses the operations, the fifth floor of the New Glitnir headquarters on Kirkjusandur in Reykjavik. The role of the Resolution Committee is to make all important decisions regarding how the bank's assets are resolved. Steinunn Guðbjartsdóttir is the company's next friend during the moratorium. She also reviews all errands, categorizes them and evaluates and must approve all decisions and expenses the company gets into while under moratorium. "Her frame of work is roughly explained such that she can only agree to what insures and increases the odds of maximising the assets' worth," says Kristján.
The Resolution Committee works on behalf of the The Financial Supervisory Authority in Iceland, which also pays the wages of the members of the committee. Both the Committee and its members are expected to work at least for the next few seasons.
The wages of Glitnir bank Inc. employees will be paid by the income of the loan portfolio. The income will be retrieved by collecting on outstanding loans, which belong to the estate, and from the sales of its assets. "However, the estate will not pay off its loans for now, only the necessary costs due to collection and management, for example to pay its employees," says Kristján. Claimants will get the rest when the cost of collection and payoff has been paid up.
(Image: Árni Tómasson, head of the Resolution Committee, in his office on the 5th floor of Glitnir's headquarters.)
Creditors do not want a fire sale
The loan portfolio of Glitnir bank inc. is quite extensive. To describe what is now happening in the company one can say that a loan that the Old Glitnir gave to a company somewhere in the world is now "an asset" of Glitnir Bank Inc, and therefore is a claim that needs to be collected. Glitnir bank inc. cannot call in the entire debt since it is contract protected. The debtor still needs to pay off the loan and Glitnir bank inc. makes sure this happens. If the debtor can't pay the loan, the loan will have to be renegotiated so that as much of it can be reclaimed as possible."Thankfully the claimants of Old Glitnir have said that they do not want a fire sale. They do not want the assets sold on the market as it is today, but rather to take the time that is needed, whether it is a year, five years or longer - to get as much valuables out safely as possible. That's why the Resolution Committee has hired staff to work on this," says Kristján.
He points out in comparison that Glitnir bank in Norway had a good loan portfolio and deposits. When the banks collapsed in Iceland, the people with deposits in the bank stormed the bank and extracted their deposits out of fear that the Norwegian branch would fall with the mother bank. This created a sudden dearth of ready cash, which is fatal to a bank, and the bank was headed towards bankruptcy. The Norwegian bank fund then gave an emergency loan, with the condition that it would be paid back within a week. This, however, was not possible without selling the bank fast. If the bank were to become bankrupt, the mother company would most likely have lost a part or the entire loan it had given to the bank. With these ultimatums, Glitnir in Norway had to be sold right away. "One can wonder how friendly and fair the board of the fund was," says Davíðsson, "since the very next day after the purchase, the new owners got a months extension on the loan. The president of the purchasing company was the director of the board of the fund. Most likely he would have recused himself, however, and not been a part of the handling of the deal," says Kristján.
An attitude of sympathy abroad
(Image: Employees Anna Rósa Róbertsdóttir, Kristján Þórarinn Davíðsson,CEO of Glitnir Bank Inc., and Ásmundur Gíslason.)
Kristján Davíðsson says that cooperation between Glitnir bank's employees and international businesspeople is surprisingly good. People's attitude towards the Icelanders is characterized as being more sympathetic than angry.
"Of course the claimants aren't happy with what has happened. But our communications with them have in most cases been exemplary. These are people that understand the situation, professionals, who make a distinction between the person and the problem. Thankfully it has been a complete exception that a person will rage on us. Understandably, though, each person is of course looking after their own," says Kristján. "In Norway, for example, a German bank and two funds got a court to freeze our assets. Thereby trying to protect their interest and to collect on their claim, where they think they can be paid," says Kristján. "However we did get some protection, both with the emergency laws and the moratorium, in order to avoid attacks here in Iceland."
Foreign experts work out the loan portfolio
Before the collapse, Kristján Davíðsson was one of around 100 employees in Glitnir's International Department. "Everyone in this 100 people department lost their jobs overnight and all the loans that Glitnir had specialised in, in the fishing industry and the field of renewable energy, all the loan portfolio, is in the old bank. We have established a team of loan experts to work through the portfolio, on the one hand in some cases to sell those loans to other banks at full price, or as much as, or to have them paid up on the pre-agreed time.If our clients are in trouble, which is not unlikely such as the situation is today, we need to renegotiate and help them out of trouble, if that increases the chances of getting the loan paid back," says Kristján. All this requires a lot of work, work that the international department did before. Glitnir Bank Inc. is now owned by those who lent money to the bank, the claimants, who had so called wholesale deposits in it or bought bonds from it or other kinds of financial papers. Most are foreign investors, most often banks, investment funds, pension funds, and other investors such as municipalities. The assets that the government extracted and put into New Glitnir also fall under that definition, and it is intended to settle that debt with bonds or shares in the bank. This work is in full swing, and it is not clear as of yet what the result will be or how long it will take.
The claimants have formed an international creditor's committee, so called ICC (Informal Creditors Committee), consisting of 20 parties. "Most are representatives of some groups, for example communities in Britain, bond-owners in USA, or banks in Europe, to name a few," says Kristján Davíðsson.