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Ministry of Finance and Economic Affairs

Agreement between The Government of Iceland and the Resolution Committee of Kaupthing finalised

Press release nr. 61/2009

Following the heads of agreement announced on 20 July 2009, the Government of Iceland announces the signing of definitive agreements with the Resolution Committee of Kaupthing regarding the capitalisation of New Kaupthing and the basis for the compensation following the creation of New Kaupthing in October 2008. As announced on 14 August 2009, the Government of Iceland has now capitalised New Kaupthing with ISK 72 bn of tier 1 capital through the issue of Government bonds, giving the bank a core tier 1 ratio of approximately 12 per cent. This puts New Kaupthing on a secure financial footing for its future operations and development.

As described in the announcement of 20 July 2009, under the agreements, the Resolution Committee of Kaupthing has the opportunity to acquire control of New Kaupthing by capitalising the bank directly. In this event the Government of Iceland will continue to contribute 35 per cent of the total capital required. The Government’s investment in New Kaupthing will be in the form of tier 2 capital and a minority ordinary share holding. The final terms will be set at the date Kaupthing decides to capitalise the bank which can be no later than 31 October 2009.

In the event Kaupthing decides not to capitalise New Kaupthing the Government will continue to own New Kaupthing. However the agreements provide, inter alia, for an option for Kaupthing to acquire the Government’s shareholding exerciseable between 2011 and 2015 at a price which provides for the Government to receive an appropriate level of return on its investment.

Ministry of Finance, September 4 2009



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