Capitalisation and compensation agreement on process between the Government of Iceland and the Resolution Comittee of Landsbanki

The Government of Iceland and the Resolution Committee of Landsbanki have reached agreement in relation to a process by which compensation payable to the creditors of Landsbanki arising from the creation of New Landsbanki in October 2008 will be agreed.

New Landsbanki will be capitalised by the Government on 14 August 2009. The estimated amount of capital to be provided by the Government, subject to ongoing discussions, is approximately ISK 140 bn.

The Government and the Resolution Committee have agreed to a further period to allow completion of due diligence by the Resolution Committee, its advisers and creditor representatives and the finalisation of the terms of a bond instrument to be issued by New Landsbanki in connection with compensation. These negotiations will be conducted with a view to agreement by 31 July 2009. It is envisaged that this bond instrument will be issued by 14 August 2009 in tandem with the capitalisation by the Government.  The parties have also agreed that they will seek to conclude all negotiation of other compensation to be provided to Landsbanki by 14 September 2009.

Hawkpoint is acting as exclusive financial adviser to the Government and Barclays Capital as exclusive financial adviser to the Resolution Committee of Landsbanki in this transaction.  In addition creditor representatives participated in the negotiations.

Commenting on the agreement reached, Steingrímur J. Sigfússon, the Minister of Finance of Iceland said:

“We are pleased to have achieved this agreement on process with the Resolution Committee of Landsbanki.  In accordance with its strategy for resolving the compensation to the old banks, the Government is committed to allowing the Resolution Committee of Landsbanki and creditors time to complete their due diligence in order that a final settlement can be achieved.  The agreement today now allows the Government to complete the capitalisation of New Landsbanki and therefore put the bank on a sound financial footing to allow for its future development.”

Commenting on the agreement reached, Lárentsínus Kristjánsson, as Chairman of the Resolution Committee of Landsbanki said:

“The Resolution Committee of Landsbanki is pleased that through constructive negotiations and related due diligence, we now have an agreement with the Government on a process to complete the capitalisation of New Landsbanki and the structuring of compensation for transferred assets. We look forward to completing our work with New Landsbanki over the coming weeks.”

Commenting on the agreement reached, Ásmundur Steffánson, the CEO of New Landsbanki said:

“I am pleased that following the comprehensive discussions with the creditors of Landsbanki we are now in the final steps of completing the balance sheet of New Landsbanki.”

Ministry of Finance, July 20 2009