Landsbanki Guarantees - update

 -  28 May 2009

2004 Guarantee

As outlined in the administrators' statement of proposals dated 20 November 2008 (a copy of which can be found here), pursuant to an agreement dated 19 January 2004 between Landsbanki Islands h.f. ("Landsbanki") and Heritable (the "2004 Guarantee"), Landsbanki provided a guarantee and indemnity in respect of all monies due, owing or incurred by Heritable to Heritable's creditors (provided that, in respect of a debts owed by Heritable to suppliers of goods and services, the relevant amounts exceed 30,000). A copy of the 2004 Guarantee was appended to the statement of proposals and can also be found here.

The Resolution Committee of Landsbanki has asked the administrators to draw creditors' attention to the recent service on Heritable by Landsbanki of a notice of termination in respect of the 2004 Guarantee (the "Termination Notice"), a copy of which can be found here. Under the terms of the 2004 Guarantee, Landsbanki is entitled to terminate its liability thereunder by giving at least three months' notice to Heritable. At stated in the Termination Notice, the effective termination date of the 2004 Guarantee is 3 July 2009.

Creditors should note that:

(i) The 2004 Guarantee provides that its termination at any time "shall not affect [Landsbanki's] obligations to [Heritable creditors] in respect of [liabilities of Heritable to its creditors] which have been incurred prior to the date of termination". In other words, its termination will not affect claims by Heritable creditors against Landsbanki under the 2004 Guarantee in respect of any liabilities of Heritable to creditors which arise prior to 3 July 2009.

(ii) The Termination Notice makes no reference to the 2003 Guarantee (see below) and does not appear to relate to it.

(iii) The 2004 Guarantee provides that, in the event of its termination, Landsbanki is obliged to give notice to Heritable depositors, informing them of the effective termination date and "giv[ing] them the option of either retaining their deposits with Heritable but without the benefit of [the 2004 Guarantee] or withdrawing their deposits prior to the effective date of termination of [the 2004 Guarantee]". This provision cannot affect the position of depositors in Heritable's administration. Depositors remain unsecured creditors of Heritable and their claims will be dealt with in the administration in the ordinary manner.

2003 Guarantee

In their statement of proposals, the administrators also drew creditors' attention to the existence of a letter from Landsbanki to the Financial Services Authority, executed as a deed on 30 June 2003 (the "2003 Guarantee"), pursuant to which Landsbanki irrevocably and unconditionally undertook "to guarantee the full and prompt discharge by Heritable of all liabilities of Heritable to any person howsoever arising including but not limited to liabilities to its depositors".

Unlike the 2004 Guarantee, the 2003 Guarantee does not include any minimum threshold for claims by trade creditors of Heritable.

A copy of the 2003 Guarantee was not originally appended to the statement of proposals but the administrators are now satisfied that it should be made available to creditors and a copy can be found here.

Claims by Heritable creditors under the guarantees - need to obtain and rely on own advice

Creditors of Heritable are reminded that they should consider the action they need to take to make a claim and protect their rights against Landsbanki under the guarantees described above.

Following a request from the Resolution Committee, a Winding-up Board for Landsbanki was appointed by the Reykjavik District Court to handle claims against Landsbanki and its eventual winding-up. Details of the winding-up proceedings can be found on this page, while more general information as to the Icelandic process to which Landsbanki is subject can be found on this page.

Please note that neither Heritable nor the administrators are providing any advice or assuming any responsibility to creditors in connection with the guarantees or claims made thereunder and creditors should consider taking their own advice, and such action, as they consider to be necessary, including advice as to the validity and effect of the Notice of Termination. Heritable and the administrators also give no assurances as to whether any claims by creditors under the guarantees will be accepted by Landsbanki or, if claims are accepted, as to the timing and amount of any distribution to creditors.

Subject and without prejudice to this important point, the administrators have approached the Winding-up Board to discuss whether any further steps can be taken at this time to streamline the process for the submission of claims under the guarantees. The Winding-up Board has advised that, at the present time, they do not wish to enter into any formal arrangement with the administrators for these purposes and creditors should submit their claims directly to Landsbanki in accordance with the Icelandic procedural requirements described on their website.