31 December 2013

Drómi, ESÍ, and Arion Bank conclude settlement agreements - Drómi settles with Arion, which acquires Drómi and Hilda’s household loans

The Central Bank of Iceland Holding Company (ESÍ), Hilda ehf. (a subsidiary of ESÍ), Drómi hf. (the asset portfolio of SPRON and Frjálsi), and Arion Bank have reached an agreement concerning ESÍ/Hilda’s takeover of specified Drómi assets and liabilities and the settlement of Arion Bank’s claim against Drómi.

Drómi’s debt to Arion Bank, in the original amount of 100 b.kr., derives from the Financial Supervisory Authority’s (FME) 21 March 2009 decision to transfer SPRON’s deposits to Arion Bank. SPRON’s assets, including loans, were placed in a separate company, Drómi, and pledged to Arion Bank as collateral for deposit liabilities. The debt is paid up in full with these assets, including Drómi and Hilda’s household loans. Hilda will acquire Drómi’s corporate loans and appropriated assets. The agreements will not activate any Treasury guarantees. Furthermore, they will expedite the conclusion of SPRON’s winding-up proceedings.

The delivery of assets according to the agreements will take place in coming weeks.

Central Bank Governor Már Guðmundsson describes the agreements as yet another phase in the reconstruction of the financial system following the banking crisis. “The agreements entail the transfer of household debt from Drómi to operating commercial banks. Furthermore, they are an element in the recovery of the Central Bank’s claims against failed financial institutions – claims that are held by ESÍ. The agreements are the result of hard work by the board, staff of ESÍ ehf. and consultants, and I would like to thank them and their counterparties for their efforts,” said Már Guðmundsson.

Arion Bank Director Höskuldur H. Ólafsson added: “It is extremely gratifying that these contracts have been finalised. We will use the coming weeks to review the matter and decide the next steps. We are considering factors relating to Drómi’s operations and to the loan portfolios that the bank has now acquired. The quality of the loan portfolios varies somewhat: most are very good loans, but some portions of them will require a considerable amount of work. We will make every effort to build up our business relationship with this group and place it on a stronger foundation.”

Hlynur Jónsson, chair of the SPRON winding-up committee, said: “The SPRON winding-up committee is extremely glad that this important part of the winding-up proceedings has been brought to a positive conclusion – one that will enable us to conclude our business earlier than originally anticipated. This agreement allows creditors to receive payments towards general claims and provides for full settlement with Arion Bank, and the State is protected against loss. We wish to thank our members of staff for their contribution towards this important outcome. We would also like to thank our counterparties for a professional negotiating process characterised by a unanimous desire to bring the matter to a positive conclusion for all parties.”

Further information related to the Central Bank of Iceland and ESÍ can be obtained from Már Guðmundsson, Governor of the Central Bank, and Haukur C. Benediktsson, Managing Director of ESÍ, at tel: +354 569 9600.

Further information related to Arion Bank can be obtained from Haraldur Guðni Eiðsson, Director of Communications, at haraldur.eidsson@arionbanki.is, tel. +354 856 7108.

Further information related to Drómi can be obtained from Magnús Steinþór Pálmarsson at tel. +354 841 2141.


No. 48/2013

30 December 2013