Financial Restructuring of Lyfja hf. completed

Glitnir hf. has signed an agreement with Árkaup hf., the owner of the pharmacy chain Lyfja hf. for the financial restructuring of Lyfja, subject to the approval of the competition authorities. This action ensures Lyfja's activities will continue and adjusts its debts to fit the company's debt service capacity.

The restructuring includes adjustments and write downs to part of Lyfja's loans by Glitnir, as the company's main lender, in part reflecting verdicts recently pronounced by the Supreme Court on the illegality of exchange-rate-linked loans. Lyfja's current share capital will be completely written-off while part of Glitnir's loans will be converted to share capital, with the result that Glitnir will own a 92.5% stake in Lyfja. Árkaup, which also held outstanding loans owed by Lyfja, will convert all of these to share capital and thereby own the remaining 7.5% in the company. This transaction is on non-cash basis as Glitnir will not inject any new funds into Lyfja.

Since 2008, Lyfja's activities have been strongly affected by the contraction in the Icelandic economy and the drop in the ISK exchange rate, in tandem with demands of the Icelandic society for a reduction in the cost of pharmaceuticals. The company held loans in foreign currencies when the ISK exchange rate plunged in 2008, which resulted in its debt position becoming unmanageable in the longer term. Lyfja's Board of Directors and management have responded to these difficult circumstances with a variety of cost-cutting measures, which have delivered significant results. The financial restructuring corrects an unsustainable debt situation, while at the same time preserving the value inherent in its activities and human resources.