Landsbankinn hf. - Company Announcement

Landsbankinn hf.: Agreement between Landsbankinn and LBI to amend bond terms enters into force

On 8 May 2014, Landsbankinn hf. and the Winding-up Board of LBI hf. reached an
agreement on amendments to the settlement bonds negotiated in December 2009. 
The Winding-up Board of LBI hf. made the agreement conditional on receiving
certain exemptions, in accordance with the Foreign Exchange Act. 

The Winding-up Board of LBI hf. has today notified Landsbankinn that the
authorities have approved the necessary exemptions and that the agreement has
as a result entered into force. 

The final payment from Landsbankinn to LBI hf. will now take place in October
of 2026 instead of October 2018. The outstanding amount is paid in ten bonds
maturing every second year, issued in GBP, USD and EUR. Landsbankinn is
authorised to make full or partial prepayment, without cost, at any time during
the term. 

Landsbankinn and the Winding-up Board of LBI have also agreed on amendments
that allow Landsbankinn, under certain circumstances, to postpone payment of
the amounts maturing in 2018 and 2020. Furthermore, the minimum collateral
requirement has been lowered from 125% to 115% of the outstanding amount at
each time. 

Interest rates will remain unchanged at a 2.9% margin until October 2018,
stepping up to a 3.50% margin for the 2020 tranche to end at a 4.05% margin for
the final maturity in 2026. 

Each tranche maturing in 2016 to 2026 will amount to the equivalent of ISK 30
billion, with the exception of the 2018 tranche in the equivalent amount of ISK
40 billion. Upon entry into force of the agreement, Landsbankinn will pay the
equivalent of ISK 30 billion and the outstanding amount on the bonds will
subsequently equal ISK 196 billion. 

Steinthór Pálsson, CEO of Landsbankinn: "This is excellent news for the
Icelandic economy. This agreement represents an important step towards
resolving national debt issues and lifting capital controls. The terms of the
new bond are very manageable for Landsbankinn and the amendment will facilitate
the Bank's efforts to secure financing on international markets, as we have
previously stated. This agreement also abolishes special restrictions on
dividend payments, for the benefit of the Bank's shareholders. This is an
extremely important milestone for Landsbankinn, one we have worked tirelessly
to achieve in recent years."

The bonds were issued based on decisions by the Financial Supervisory
Authority, Iceland, in accordance with provisions of the Emergency Act. The
amount was determined based on the difference between the value of assets and
liabilities transferred to Landsbankinn. 



For further information contact:

Kristján Kristjánsson, pr@landsbankinn.is, +354 410 4011/+354 899 9352