Agreement on a Settlement for the Bank’s Luxembourg Subsidiary

Glitnir’s Resolution Committee and the Central Bank of Luxembourg (BCL) have signed an agreement providing for settlement of debts for Glitnir’s subsidiary, Glitnir Bank Luxembourg S.A. BCL is part of the network of European central banks in member countries of the Eurosystem. Negotiations have been underway since Glitnir Bank Luxembourg S.A. was placed under a suspension of payments mode in early October. This agreement will facilitate Glitnir’s Luxembourg subsidiary to be placed into a voluntary and solvent liquidation.

The agreement means that important interests of Glitnir and its customers will be safeguarded; the Luxembourg subsidiary will have a period of up to five years within which to maximise the value of its assets and repay all debts owed to BCL. The agreement also foresees that securitised loan portfolios, pledged to BCL, and which include, for instance, loans to Glitnir’s Icelandic customers, will continue to be administered by Glitnir’s Resolution Committee. According to the agreement, proceeds from the corporate loan portfolio of Glitnir Bank Luxembourg are furthermore to be used to repay debts to BCL. The portfolio principally includes mortgages on commercial and residential real estate in the Nordic countries, the UK and Germany.

A proposal for a settlement with creditors has been presented to all creditors for voting on 16 March 2009. According to this proposal, creditors other than BCL will receive payment of their claims of principal; the agreement was therefore a basic prerequisite enabling a favourable resolution of outstanding issues at Glitnir Bank Luxembourg. The proposal also foresees that all customer deposits will be repaid in the near future. This move also eliminates uncertainty for the Bank’s employees in Luxembourg, as it will ensure them their legal and contractual rights concerning termination of employment, which would not have been the case had the bank gone into receivership.

Árni Tómasson, chairman of Glitnir’s Resolution Committee: “I am very pleased that the situation at Glitnir Bank Luxembourg has now been settled to the satisfaction of both parties, and giving us leeway to work on resolving these complicated issues in a manner which will safeguard the interests of all parties optimally.”

For further information contact:
Kristján Óskarsson, Resolution Committee of Glitnir: +354 844 4411