Notice from the Winding–up Board of Glitnir

With regard to recent reports in the media that so-called hedge funds hold over 60% of Íslandsbanki hf. and that they enjoy the major share of the revaluation of the bank's assets, the Winding-up Board of Glitnir would like to underline the following aspects:

The decision by the Financial Supervisory Authority of 14 October 2008 transferred certain assets and obligations of Glitnir hf. to New Glitnir hf. (now Íslandsbanki hf.). These included assets of Glitnir's insolvent estate which should have gone to the bank's creditors. The conclusion of the settlement reached between the banks under the direction of the government was that Glitnir took over 95% of the share capital of Íslandsbanki hf., since the bank's creditors owned the interests which were transferred to the new bank.

Glitnir's general creditors have suffered major losses, estimated to amount to 70-75% of their original exposure to Glitnir. Upon the collapse of Glitnir and other banks in Iceland, enormous sums were lost overnight, with part of this loss attributable to the adoption of the emergency legislation which made deposits priority claims at the cost of general claims. At the instigation of the government, a cautious assessment was made when the assets were transferred to the new bank, to ensure the stability of its operations and the successful reconstruction of the financial system. This cautious assessment, however, resulted in a very major loss for Glitnir, which to some extent is now being recovered with the revaluation of Íslandsbanki's assets. The revaluation of assets at Íslandsbanki is therefore legitimately the property of Glitnir's creditors in accordance with their shareholding in the bank.

It should be pointed out that Glitnir's creditor group is comprised of a large number of international and Icelandic investors, including individuals, pension funds, enterprises and financial institutions. Around 70% of the claims lodged against Glitnir's estate are still owned by the original creditors. The remaining 30% have changed hands, and among the purchasers are international banks and the hedge funds. It is not possible to estimate with any certainty which claims changed hands during the time between the bank's collapse and the expiry of the deadline for lodging claims, since a major portion of the bank’s liabilities were market bonds.

It should also be pointed out that creditors have no formal involvement in Glitnir's management and even less in the management of Íslandsbanki. The Financial Supervisory Authority set strict conditions for Glitnir's holding in Íslandsbanki. A special holding company, ISB Holding, controls this stake. It has three directors on its Board, two of them, including the Chairman of the Board, must be independent of Glitnir and its creditors. The Board of Íslandsbanki is comprised of seven directors, one from the state, one nominated by Glitnir and five who are independent of Glitnir and creditors. Various other conditions were set by the government to further ensure the independence of Íslandsbanki and its separation from Glitnir and creditors.