Sparisjóður Mýrasýslu - Company Announcement

- SPM reaches deal with largest creditors and sells all its assets to New Kaupthing Bank

On 27 March 2009 the largest creditors of Sparisjódur Mýrasýslu ("SPM") agreed
to a proposal on the financial restructuring of the bank. On the basis of this
agreement SPM has sold all its assets to New Kaupthing Bank hf. (New
Kaupthing). New Kaupthing will pay for the assets with bonds and shares issued
by New Kaupthing. 

In order to guarantee the continued smooth operation of SPM it is vital that
the rights and obligations contained in the purchase agreement between SPM and
New Kaupthing are delivered in a single action. In accordance with a request
from the board of directors of SPM, the Icelandic Financial Supervisory
Authority has agreed to exercise the authorisation contained in Article 100 a.,
paragraph 3 of Act no. 161/2002 on Financial Undertakings, cf. Article 5 of Act
no. 125/2008, to assume the authority of a meeting of guarantee capital owners
of SPM and decide to transfer in a single action from SPM to New Kaupthing the
rights and assets specified in the purchase agreement. This has been done
because the transfer of deposits and loans, security rights and other rights
and assets which must be transferred, without there being a simple merger, is
not under the control of the board of directors of SPM. 

With this sale, all assets and deposits of SPM are transferred to New Kaupthing
which takes over the operations of SPM in Borgarnes. The branches of New
Kaupthing and SPM in Borgarnes are scheduled to be merged in the next few
weeks. At the same time New Kaupthing will acquire all guarantee capital in
SPM. New Kaupthing will also acquire SPM's subsidiaries, including Sparisjóður
Ólafsfjarðar and Afl Sparisjóður in Siglufjörður and Sauðárkrókur. These
subsidiaries will continue to operate as before. 

This ensures that there will be no disruption whatsoever in services to
customers of SPM and related savings banks and they will be able to obtain all
services as before. It also ensures there will be a minimum impact on
employees. 

SPM has experienced severe financial difficulties since the beginning of 2008,
with the bank estimated to have made a loss of ISK 21 billion during the last
operating year according to pro forma financial statements. However, this
brings a successful conclusion to the issue for creditors and stakeholders. 


Proposal on financial restructuring

As stated above, the largest creditors of SPM agreed to a proposal on the
financial restructuring of the bank on 27 March. It was proposed that general
and subordinate claims against SPM be settled as follows: 

•  43.7% of general claims be paid for by increasing guarantee capital in SPM
   so that each krona of general claims is equal to one krona of guarantee
   capital; 

•  3.1% of general claims be paid for in cash;
•  53.2% of general claims be paid for in bonds (one or more).  The bond will
   be a 9-year instrument, without instalments the first two years; and 

•  Subordinate loans would be paid in full (100%) by increasing guarantee
   capital in SPM on a 1:1 basis. 

It was assumed that if SPM's proposal were accepted, then SPM would be
converted into a limited liability company and then merged with New Kaupthing. 

The board of directors of SPM intends to apply for permission to seek
composition in accordance with the provisions of Act no. 21/1991 on Bankruptcy
etc. This is likely to be preceded by a moratorium on payments, while a draft
composition agreement and the necessary supporting documentation are prepared. 

Draft financial results for 2008

According to the draft financial results for 2008, SPM (parent company)
reported a loss of ISK 21,147 million after tax. This loss is explained by the
decrease in the price of shares owned by SPM and increased provisions for
losses, which were considered necessary in light of the fact that the financial
situation of companies and individual customers of SPM had deteriorated sharply
owing to the depreciation of the Icelandic krona, high interests rates and the
slowdown in the Icelandic economy. 

Total assets amounted to ISK 36,466 million of which ISK 25,295 million were
loans to customers. Total liabilities of SPM amounted to ISK 51,621 million.
Equity according to the balance sheet was negative by ISK 15,155 billion,
compared to a positive figure of ISK 6,299 billion at the end of 2007. 

The table below shows the key figures from the draft financial results for 2008.
See attachment.

Attachments:

fréttatilkynning 2009-04-03 v6 ensk.pdf