Landsbankinn has today paid in full the outstanding amounts on bonds issued to Old Landsbanki Íslands, now LBI ehf., as a consideration for the assets and liabilities transferred from LBI to the Bank in October 2008. On the payback date, the outstanding amount was ISK 16.2 bn; upon issuance to LBI, the total amount of the bonds was ISK 350 bn, at the then current exchange rate.
Discharging the debt to LBI in full allows Landsbankinn to lower its financing cost and lift the collateralisation of assets securing the bonds.
Lilja Björk Einarsdóttir, CEO of Landsbankinn:
"The successful operation and favourable financing of Landsbankinn, coinciding with improving economic conditions, have allowed the Bank to discharge the debt owed to LBI significantly faster than expected. While the outstanding amount on the debt owed to LBI was not very high, full payment of it is quite a turning point. The debt to LBI was originally quite considerable, all in foreign currency and the repayment period short. Landsbankinn's terms on international financing markets grow steadily more favourable and discharging the less favourable bonds to LBI allows the Bank to save a significant amount on financing cost."
Original maturity in 2018 extended to 2026 by agreement
The bond issuances between LBI and Landsbankinn were based on an agreement that accorded with decisions of the Icelandic Financial Supervisory Authority (FME) in October of 2008, on the transfer of assets and liabilities from Landsbanki Íslands hf. to Landsbankinn. The bonds were in foreign currency and the original maturity date was October 2018. The improving position of Landsbankinn and recovery of the Icelandic economy quickly created room to make pre-payment on the debt and the Bank made ISK 70 bn and ISK 50 bn pre-payments in 2012 and 2013, respectively. It was nevertheless considered necessary to amend the repayment terms of the bonds. Extending the maturity profile supported the easing of capital controls, reduced uncertainty about the Bank's foreign funding and improved its capital structure for the future. In May 2014, Landsbankinn and the Winding-up Board of LBI agreed on amendments to the bond terms. The maturity date was pushed back to October 2026 and the Bank authorised to make pre-payment, in part or in full, without incurring any additional cost, at any time during the period.