13.7.2010

Creditors approve a Composition Agreement for Straumur

Reykjavik, Iceland, July 13th 2010

Today, the creditors of Straumur Burdaras Investment bank have voted on and approved a Composition Agreement for the company. By virtue of the Agreement, the ownership and control of the company is transferred to creditors who will convert a part of their claims for shares and receive a bond issued by the company.

The assets of Straumur will in the coming years be managed and sold with the aim of maximizing the recovery of creditors. It is projected that secured creditors, i.e. the Icelandic state and Islandsbanki, will get their claims paid in full. Unsecured creditors can expect a recovery of close to one half of their claims.

The Composition Agreement furthermore lays the foundations for Straumur’s ongoing investment banking operations in Iceland within a separate legal entity.

In all, creditors holding 99.6% of unsecured claims voted in favour of the Composition Agreement.

Reynir Vignir, chairman of the Straumur Resolution Committee: "The Resolution Committee is very pleased with the decisive support Straumur’s Composition Agreement, received in today’s vote. From the outset, the Resolution Committee, the Committee members, the staff of Straumur as well as the Winding Up Board have enjoyed a close cooperation with Straumur’s creditors and the result of today’s vote is in line with our expectations. The creditors have had access to information pertaining to the company’s status since the Resolution Committee was formed and to the Composition Agreement for the last few months. They obviously regard the Agreement as beneficial. The next weeks will see the transition of power to the creditors in accordance with Straumur’s restructuring plan."

Ragnar H. Hall, Supreme Court Attorney and member of Winding Up Board: "The Winding Up Board views this extensive support of Straumur’s restructuring, in a way that stakeholders take control of the company and are thus able to take action to secure maximum repayments of their claim, as an extremely positive one for the company and indeed the Icelandic financial system as a whole. It is still important to stress that the Agreement does not become valid until ratified by the Icelandic Courts."

Óttar Pálsson, Straumur CEO: "The restructuring of Straumur is a result of a close cooperation between the company's staff, The Resolution Committee, The Winding Up Board, advisers and major creditors during the past few semesters. It is a great pleasure that the Composition Agreement is now agreed upon by the creditors and by this overwhelming majority. Ahead of us are important tasks and we are determined to live up to the trust, which the company’s new owners have vested in us."

Attached: Information on the current situation of Straumur. Also to be found at www.straumur.com.

For further information:

Reynir Vignir, chairman of the Straumur Resolution Committee, tel.: +354 840 5327

Óttar Pálsson, Straumur CEO, tel.: +354 840 9148

Stefán Broddi Gudjónsson, Straumur Press Officer, tel.: +354 858 6798

Straumur’s Position

Background

Due to special circumstances in the financial market, on March 9th. 2009, the Icelandic Financial Supervisory Authority (FME), under the emergency act, assumed control over Straumur/Burdarás Investment Bank. A resolution committee was subsequently appointed, taking over all the authority of Straumur’s board of directors and shareholder’s meeting. Straumur was immediately closed for business and ten days later the bank was granted a moratorium by the Reykjavík District Court. The objective of the resolution committee was to maximise the value of Straumur’s assets for the benefit of all of its creditors. Around 50 employees at Straumur’s offices in Reykjavík, London and Copenhagen have since worked towards this goal.

Assets and Asset Management

Straumur holds 143 assets in its portfolio with a total estimated value of EUR 1.2bn. of which more than 90% are outside of Iceland. The asset portfolio is diversified geographically and by sector, with the largest exposure being to Denmark with 24% of total estimated value as well as to the real estate sector with 22% of total estimated value. The top 20 assets represent approximately 78% of the total estimated value of the asset portfolio.

A number of Straumur’s assets require active, daily hands-on management by Straumur’s employees, which has posed a great challenge following Straumur’s moratorium and the ongoing financial crisis. Over the past fifteen months Straumur has led seventeen major restructurings among its assets to avoid them reducing in value or to improve their value, working towards the sole goal of maximizing the recovery rate of creditors.

Creditors and the Informal Credit Committee

Straumur has 120 composition creditors of mainly financial services companies, investment funds and pension funds, the largest being Landsbankinn, Raffeisen Zentralbank Österreich, Goldman Sachs Lending Partners, Bayerische Landesbank and Deutsche Bank. Priority creditors and secured creditors such as the Icelandic state and Íslandsbanki, as relates to the transfer of Straumur’s deposits to Íslandsbanki, will have their claims paid in full.

In April 2009, Straumur’s largest composition creditors formed an informal credit committee (ICC), which represents 12 creditors, which in total hold more than 60% of Straumur’s unsecured claims. Straumur’s management has ever since worked closely with ICC. The restructuring plan is a result of that cooperation.

Restructuring

Straumur’s restructuring plan has the purpose of transferring the ownership and control of the company to the composition creditors. Given the Icelandic Courts ratify it, an Asset and Liability Management Company (ALMC) solely owned by composition creditors will be established to take over all of Straumur’s assets. The focus of the ALMC is to maximize the value of its assets for the benefit of creditors (owners). Under the ALMC, broking and advisory business will be re-established in a small-scale investment bank, which subsequently will be demerged from ALMC. The recovery to composition creditors in Straumur management’s last expected case is 47%.

The Composition Agreement

According to the composition agreement, the ALMC will issue bonds maturing on 31 Dec. 2014 to composition creditors that will have face value equal to 99% of the value of their claim and ordinary shares with nominal value of 1% of their claims. Together, the bonds and the shares form depositary units tradable on both Euroclear and Clearstream clearing systems. The bonds have the potential for further two years’ extension if so decided by an extended majority of two thirds of the bondholders, at which time the bonds will convert into ordinary shares of the ALMC.