Lánamál ríkisins - Company Announcement

New Treasury bond series issued

Recent press releases have described the capitalisation of Íslandsbanki and New
Kaupthing and the progress of negotiations with Landsbanki. Íslandsbanki's own
funds are estimated at 65 b.kr. and New Kaupthing's at 72 b.kr., which will be
contributed in the form of Treasury bonds, with the actual amount of the
capital injection subject to final approval by the Financial Supervisory
Authority. As regards New Landsbanki (NBI), the Government and the resolution
committee have requested that the Financial Supervisory Authority grant an
extension of time to reach a final conclusion on recapitalisation and on
payments for the assets transferred from old Landsbanki to NBI. 

In order to fund the capital contributions to the banks, the Treasury is
issuing a new series of Treasury bonds. The maximum amount of the issue is 300
b.kr. The series will bear monthly interest that will be based on the interest
on financial institutions' current accounts with the Central Bank. The series
will mature on October 9, 2018. In other respects, reference is made to the
accompanying prospectus. The series is to be listed on the stock exchange, but
there will be no market making for the bonds. 

Glitnir and Kaupthing will be offered the option of purchasing the majority of
the State's share in Íslandsbanki and New Kaupthing. If they exercise that
option, the Government has agreed to contribute capital to the two new banks in
the form of subordinated loans in partial satisfaction of their capital
requirement. The loans in question will constitute 4% of their risk-weighted
asset base. 

It has been agreed that, if the old banks should purchase the new ones, a
portion of the Treasury bonds will be returned to the State. Glitnir has until
September 30, 2009, to conclude the purchase, and Kaupthing has until October
31, 2009. 

Attachments:

prospectus_rikh181009_english.pdf

rikh181009_en.pdf