Lánamál ríkisins - Company Announcement

Treasury Prepays ISK 50 billion of the Central Bank´s bond – 10% overall reduction of debt in 2015

At year-end 2015 the Treasury made a payment of ISK 49.9 billion on a bond,
issued to the Central Bank of Iceland. This represents one of the largest
single repayments of Treasury debt to date. The instalment reduced the
Treasury's cash balance with the Central Bank. 

Originally issued in January 2009 to reinforce the Central Bank's equity
position, the bond is to be repaid in annual instalments of ISK 5 billion. In
2015 the Treasury paid around ISK 47 billion in addition to the requisite
annual instalment on the bond, leaving an outstanding balance of around ISK 90
billion at year-end. The intention is to pay off the debt in full during the
current year. After taking into consideration the payment towards the Central
Bank's bond, the Treasury's balance with the Central Bank at year-end 2015 was
ISK 88.5 billion. 

The Treasury also prepaid a major portion of its outstanding foreign loans
during the past year, with total payments amounting to ISK 103 billion. In the
first half of 2015 the Treasury bought back almost half of the outstanding
stock of its 2011 USD issue, equivalent to around ISK 67 billion. In May a loan
from Poland, provided to Iceland in connection with the economic recovery
programme agreed by the Icelandic government and the IMF, was prepaid amounting
to around ISK 7.5 billion. The Treasury also prepaid the so-called Avens bond
in July, in the amount of ISK 28.3 billion. 

 As a result, during the past year the Treasury has prepaid around ISK 150
billion in domestic and foreign debt.  Other things remaining equal, these
prepayments will reduce the Treasury's interest expenses by around ISK 7
billion annually. At year-end 2015 total Treasury liabilities are estimated at
around ISK 1,349 compared to ISK 1,492 at year-end 2014. This represents a 10%
reduction YoY.  The intention is to further reduce debt in 2016 to around ISK
1,171 billion by year-end. 

For further information contact Esther Finnbogadóttir, tel. (+354) 545-9200.