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Ministry of Finance and Economic Affairs

Agreement between the Government of Iceland and the Resolution Committee of Landsbanki on compensation instrument

Press release No. 69/2009

The Government of Iceland and the Resolution Committee of Landsbanki are pleased to announce that an agreement has been reached on the outline terms for the compensation payable by New Landsbanki to Landsbanki in return for the transfer of net assets to New Landsbanki in October 2008.

It has been agreed that the Government will provide the majority of the equity capital for New Landsbanki although a substantial equity stake of ISK 28billion will be issued initially to Landsbanki as part of the compensation payment. The balance of the compensation payment will be satisfied by means of the issue of a ISK 260 billion ten year bond by New Landsbanki. A review of the valuation of a substantial portion of the loan portfolio transferred in October 2008 shall be conducted up to December 2012. As a result of that review, the size of the bonds issued to Landsbanki may be increased by up to approximately ISK 90 billion. In this event, the issue of additional bonds will be accompanied by a corresponding release of the equity issued to Landsbanki at closing. Detailed terms of the compensation bonds and the capitalisation are expected to be agreed [within the next few weeks].

New Landsbanki and creditor representatives participated in the negotiations leading to this agreement. Hawkpoint is acting as exclusive financial adviser to the Government and Barclays Capital to the Resolution Committee of Landsbanki in this transaction.

Commenting on the agreement reached, Steingrímur J. Sigfússon, the Minister of Finance of Iceland said:
"This agreement with the Resolution Committee of Landsbanki is a key step to securing the financial strength of the Icelandic banking system following the deals completed in respect of the other two principal banks in Iceland."

Commenting on the agreement reached, Lárentsínus Kristjánsson, the Chairman of the Resolution Committee said:
"This outcome is highly acceptable for the Resolution Committee, and marks a major step forward in this procedure. The conclusion of these agreements is the result of very extensive efforts and I would like to take this opportunity to thank everyone who has made a contribution here."

Ministry of Finance, October 12 2009

Press enquiries:

Ministry of Finance:

Elias Jon Gudjonsson, + 354 694 14 80

Financial Dynamics:

Andrew Walton, + 44 7711 264 157



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