Meeting on 5 June 2009 - 10am

With reference to Article 13 of the Act on Bankruptcy, etc., No 21/1991 creditors of Straumur-Burðarás fjárfestingabanki hf. are hereby called to a meeting which will be held at 10:00 am on Friday 5 June 2009, in the conference hall on the second floor of at Hilton Hotel Nordica, Suðurlandsbraut 2, Reykjavík. The meeting will also be broadcasted live over the internet. At this meeting the status of the company and plans for the reorganisation of its finances will be laid out. The view of attending creditors will be sought as regards these plans. 

Here you can see the presentation from the meeting.

   

Minutes from the 5 June meeting

MEETING HELD BY THE APPOINTEE OF STRAUMUR-BURÐARÁS INVESTMENT BANK HF. DURING THE MORATORIUM

On Friday, 5 June 2009, at 10:00 am, a meeting was convened in a meeting room of Hótel Nordica, Suðurlandsbraut 2, in Reykjavík with creditors of Straumur-Burðarás Investment Bank hf., Reg. No. 701086-1399, Borgartún 25, Reykjavík, concerning the granting of a moratorium to the company. The debtor's appointee, Hörður Felix Harðarson, Supreme Court Attorney, convened the meeting. He also wrote the minutes of the meeting. Gunnar Jónsson, Supreme Court Attorney, chaired the meeting.

The meeting was convened as provided for in the instructions of Article 13 of Act No. 21/1991, cf. the third paragraph of Art. 98 of Act No. 161/2002, on Financial Undertakings, as subsequently amended. Furthermore, e-mail notice was sent to all known creditors of Straumur and the meeting was announced on the bank’s website.

At the beginning of the meeting, those attending were provided with detailed documentation, including a summary of the main actions taken during the moratorium period, a description of management’s plans for restructuring of operations and a breakdown of the bank’s assets and liabilities together with additional information. 

After calling the meeting to order, the chairman explained to those attending that the Appointee would begin the meeting, after which the bank’s CEO and COO would give an account of the company’s asset and liability position and the plans proposed for restructuring its operations. Thereafter, those attending the meeting would have an opportunity to express their comments or raise questions. In addition to the afore-mentioned, these would be responded to by the bank’s three managing directors and the Chairman of the bank's Resolution Committee.

A webcast was provided of the meeting and access passwords sent to known creditors. Documentation was made available on the company’s website and creditors thereby given the opportunity to follow the meeting proceedings and submit written comments. The chairman informed those present of these arrangements and described in detail to those participating electronically how they could submit their comments or questions.  

Following this the chairman introduced the Appointee, Supreme Court Attorney Hörður Felix Harðarson. HFH gave a brief account of the events leading up Straumur’s petition for a moratorium, the main actions taken during the moratorium period, the rules which applied to measures taken during this period and what the next steps would be. He also explained the principal tasks of the Winding-up Board, for instance, in seeking composition with creditors as proposed. He also explained that the intention was to apply for a six-month extension of the moratorium, and why this extension was deemed necessary in the estimation of the Resolution Committee, company management and the Appointee. Finally, HFH encouraged those attending the meeting to take advantage of this opportunity to present their comments or questions.

He was followed by the bank’s CEO, Óttar Pálsson, who explained management’s actions during the moratorium in restructuring the bank’s operations in collaboration with its creditors. Óttar presented the highlights of plans for the bank’s future operations and how these objectives could be achieved through composition. The plans are aimed at dividing the bank into an asset management company and an investment bank, both of which would be owned by the company’s creditors. Following ÓP’s account, Jakob Ásmundsson reviewed the key figures in the summary of assets and liabilities, valuation of the bank’s assets, liquidity profile and estimates of creditors’ recovery. Óttar Pálsson then spoke again, providing more details of the options available in this situation and reiterating that, in the estimation of the bank’s management, the only realistic option was to seek composition on the basis proposed, subject to the eventual details of the Scheme of Arrangements drafted in collaboration with the bank’s creditors. He then explained what the next actions would be if an extension of the moratorium were granted.

Once he had finished, the chairman opened the floor for discussion of the matters being discussed at the meeting and invited participants to make comments or raise questions. Several questions were raised, all of which were responded to by the above speakers. No objections were raised to the plans presented for an extension of the moratorium.   

The meeting was attended by around 40 creditors, with an additional 340 users registered on the bank’s website for the webcast.

No other matters were discussed at the meeting and those attending were informed that the minutes of the meeting would be accessible on the company’s website, together with the questions submitted and responses to them. None of the participants requested any special entry be made in the minutes.

The meeting was adjourned at 12:00 noon.

Questions and answers from the creditor meeting 5 June 2009.

Q: On page 23 of the presentation is a column that says: “estimated value of assets and computation of liabilities”. Can you relate the number in there to the number in the column on page 34 which gives the estimated outcome for creditors?

A: The difference between these two columns is because the statement of assets and liabilities doesn’t incorporate the cash-flows due to operating expenses, asset support, interest income and loan amortisation etc. 

Q: So if you leave a side asset disposal you will be cash-flow negative for the next 3-4 years. 

A: Yes, you can see this from the cash-flow-statement on page 28. There you can see that there are cash flows related to “Operating Expenses” and “Asset Support” under a managed work-out. On the other hand, you can see “Other Realisations” which is something you would not get if you were to liquidate today because this is interest and amortisation on interest-bearing assets that we would only receive during a managed work-out process.

Q: On page 28 what did you say about the interest you are receiving on the loan assets, where is that?

A: On “Other Realisations” which is in line 5 in the table. There is also a footnote on that below saying that this is an interest income and loan amortisation that we receive during the lifetime of those assets under the managed work-out scenarios                                                               

Q: Here it says that the composition agreement will be finalized on 30 September; I assume that finalized means that this will be approved by the District Court and paidout?                              

A: We cite that date as the target date by when we hope the District Court will have approved the Composition Agreement. However, we do not anticipate that payments would have been made to creditors by this date.  This timing may, however, slip because there is a possibility that there will be disputes regarding creditor claims and, if that happens, the Court would want to wait for the result before confirming out composition. Of course we are hoping it will not come to that and the proposed timetable is based on that assumption.

Q: Creditors are to file their claims before 18 July, do you believe that creditors should file again if you reach composition agreement or is it enough to file just once?           

A: Creditors should file their claims before or on 18 July and that is the single filing they need to do. What creditors will be asked to do also is to vote on a composition proposal. That is something we anticipate to take place early in September.

Q: Could you clarify if any significant claims will be paid out in full? That is, if you have foreseen this will be done according to Article 36 of the Bankruptcy Act, and if they will be paid out in full, what amounts does this represent?

A: You are referring to the potential of paying out minor claims in full. This is something we are considering, but we will not have a view on the quantum of this payment until all claims have been submitted to and agreed by the Winding Up Committee. We expect that any amounts paid will only marginally effect the outcome for all unsecured creditors. Under the law, all claimants will be entitled to receive a payment of up to the de minims level.

Q: What is the timescale and what compensation is being offered for late payment. Also is there an equity alternative?

A: Creditors should submit their claim before 18 July and those claims should include accrued interest until 22 April 2009. Any interest accruing after that date will have a very junior status in the composition and will most likely not be paid. With regard to the second part of the question, the proposal outlined today in the presentation assumes that creditors will be asked to convert debt to equity to some extent but the level of conversion has yet to be decided. This will be discussed further with the ICC members. Such a conversion would be undertaken as a means of handing the business over to new owners.

Q: Is Straumur planning to comment on KPMG’s range of recoveries and the work they have performed?

A: KPMG Restructuring (London) has conducted an independent review of our estimated outcome analysis for creditors. Under the firm’s confidentiality restrictions, we are not permitted to refer to the results of KPMG’s work at this meeting. In addition, the KPMG analysis is only a draft at the moment and remains to be finalized and completed. However, we believe that we are permitted to indicate that KPMG findings as they stand today are at least directionally in line with those of Straumur management, meaning that creditors stand to gain significantly higher recoveries under a managed work-out scenario as compared to liquidation.

Q: Will there be financial projections for the proposed investment bank at some time?

A: We do not have these projections presented here today because of the commercial sensitivity of such information.  If we feel at a later stage that it is appropriate to present such information, we will present projections for the Broking and Advisory Business at that time. We stress, however, that Management view the Broking and Advisory Business as a marginal operation, offering a potential source of upside for the creditors (with limited downside risk).  The recoveries presented today do not attribute any value to the Investment Bank, but do reflect the outflow of the modest regulatory capital requirement to set up the business.

Q: Why doesn´t the Resolution Committee or the Winding Up Committee (WUC) challenge the priority given to the claims by depositors on the behalf of all creditors?

A: With specific regard to status of the bonds changed to deposits, it will remain to be seen if this will be challenged or not. The WUC will need to review the claim if filed. It is for the WUC to decide if claims will be accepted as priority claims or not and possibly from there on it will be up to the court to decide if the WUC decision is challenged.  In terms of the priority status of depositors in general under the Icelandic law passed relatively recently, as communicated previously, it is really not for Straumur to challenge that but rather for creditors that believe they have suffered losses because of this legislation to seek compensation directly from the Icelandic state.

Q: Will Straumur provide a standard form for the submission of claims and will this presentation be available on Straumur´s web page.  

A: The form,as well as spelanatory notes on how to fill it out, has been posted on the Company´s web page. This presentation will be made available on www.straumur.com afther this meeting.