ISK 100 billion paid to Icelandic banks

The full and final settlement of Björgólfur Thor Björgólfsson’s debts and those of his investment company, Novator, with domestic and foreign creditors is now complete. The total amount paid to creditors is about ISK 1,200 billion, of which Icelandic banks and their subsidiaries have now received payments in total of just over ISK 100 billion. All payments were in foreign currency.

 When it was originally announced in July 2010 that agreement had been reached with all creditors, it was estimated that it would take five to six years to arrange the sale of assets and complete the settlement. Various of Björgólfur Thor’s personal assets were made over to creditors immediately the agreement was finalised, including a house in Reykjavik and a summer cottage at Thingvellir, as well as his private jet and yacht. All these assets have now been sold and the proceeds distributed to creditors. As part of the agreement, Björgólfur Thor would continue to be a shareholder in companies such as Actavis, Play, CCP and Verne Holding, and these assets would act as collateral towards the remaining debts. In the event of their sale, the proceeds from these shareholdings and other valuables would then go towards the settlement of the debts.

With the institution of the settlement procedures in the summer of 2010 it was also announced that agreement had been reached on the financial restructuring of Actavis. The sale of Actavis to the US pharmaceutical company Watson in 2012 marked a turning point and secured high payouts for the creditors. During the settlement period the Polish telecommunications company Play has experienced rapid growth and this growth has played a significant part it making it possible to complete the settlement in just four years. Investors’ confidence in this company was confirmed in February this year when demand for the company’s bonds exceeded brightest hopes.

By far the largest part of the settlement was with foreign creditors, Deutsche Bank, Standard Bank, Barclays and Fortis. Claims from Icelandic banks, Landsbanki, Glitnir and Straumur-Burðarás, made up about 10% of the total settlement. Since the agreement on the settlement of Björgólfur Thor’s debts was signed in July 2010, payments to the bankruptcy estates of the Icelandic banks and their subsidiaries have amounted to over ISK 100 billion, all being in cash in foreign currencies. The largest portion was paid to the winding-up committee for Landsbanki and Landsbanki Luxembourg, or about ISK 85 billion.

In this connection it is worth remembering that, in its report, the Parliamentary Special Investigation Commission singled out Björgólfur Thor as Landsbanki Luxembourg’s biggest debtor. Here the Commission failed entirely to take account of the fact that Björgólfur Thor was simultaneously the largest deposit holder at the bank, reducing his actual debt very considerably. The debt to the bank has now been paid off in full. In addition, payments have been made to Glitnir to the tune of around ISK 10 billion and to Straumur-Burðarás of around ISK 7 billion.

Statement issued by Björgólfur Thor Björgólfsson:

„My debts and those of my investment company to all of our creditors have now been settled, and much earlier than planned. I was at all times determined to see the settlement carried out honourably. To make this happen required a great deal of unstinting effort to maximise the value of the assets that lay behind the settlement. In the announcement of the settlement procedures in July 2010 it was stated that all debts would be made up in full, without reduction. This I have done.

I have said repeatedly that there is no way of settling debts unless people have genuine assets to pay them with. To be sure, I had large debts at the time of the crash, but by the same token my monetary holdings were large and the guarantees secure.  The Icelandic banks, plainly, lent too much money to too few people.  To make things worse, a large proportion of those who were most demanding in taking loans never had any real assets, just paper assets generated through artificial transactions with their colleagues. In the outcome, they have failed to honour their debts, and that should surprise no one.

A team of lawyers, accountants and other specialists about a hundred strong worked on reaching this debt agreement. I put everything I owned into it. In addition, my creditors were given access to all my bank statements and those of all my companies going back several years, so they could check beyond all doubt that nothing had been kept aside. This forensic accounting exercise by specialists outside Iceland went on for almost a year and a half and was completed in April 2012. I think I can claim that no one else in the Icelandic banking system has ever been subject to such open and transparent scrutiny in their debt settlement procedures.

It is quite clear that the creditors would have never gained full recovery if the assets had been distrained and sold at fire-sale prices, rather than through a negotiated settlement. All our creditors agreed to sit around the negotiating table, and this turned out to be the correct decision for all concerned in the agreement.“