Payments to Creditors

All costs of the winding-up proceedings of Landsbanki Íslands hf. are considered to be administrative claims and have priority pursuant to item 2 of Art. 110 of the Act on Bankruptcy etc. no. 21/1991. The fee of the liquidator also falls under these costs, cf. also Art. 77(2) of the same Act.

Payments to creditors is otherwise subject to the rules stipulated in Art. 102(6) of the Act on Financial Undertakings, no. 161/2002. Their main characteristics are:

• Only recognised claims will be paid in whole or in part (i.e. undisputed claims or claims concerning which a dispute has been resolved).
• It must be ensured that the bank’s assets are sufficient to pay all creditors of equivalent priority an equal proportion of their outstanding claims.
• If a dispute concerning a claim which could be entitled to partial payment is not resolved, funds shall be set aside to enable it to be paid if recognised.

Notwithstanding the above conditions, individual creditors may be paid in advance if they offer to waive their claims in return for partial payment, provided it is ensured that such payment is lower than the amount which would be paid towards the claim at a later stage given its priority ranking.

In accordance with this provision, the Winding-up Board can, in fact, begin payments to creditors if a claim is finally recognised and other conditions are satisfied. If there continues to be a disagreement on some claims which could rank equally in priority has not been resolved, the amount which would be paid towards the claim in question shall be deposited in a special escrow account. There the funds will await the final resolution and be paid to the creditor concerned, together with accrued interest, insofar as the latter’s claim is finally recognised by the courts or all objections have been withdrawn.

The Winding-up Board used this authority on December 2nd 2011 when partial payments were made following the judgements of the Supreme Court of Iceland confirming the priority of deposit claims. The Winding-up Board had previously presented its intentions in connection to the potential partial payouts on a shareholders‘ meeting on November 17th 2011. A total of 10 creditors received payments on that occasion and parallel to that payments were made to escrow accounts for other claims with equal status. Further information on partial payments of the Winding-up Board can be found on the secure creditors‘ website.

Information on the estimated value of assets is available at Financial information.