Goldman Sachs and hedge funds take Iceland bank stake
GoldmanSachs andatrioofhedgefunds have wasted no time in ploughing money back into Iceland by acquiring a stake in one of the country’s banks, less than a week after the Nordic island lifted capital controls that dated from the financial crisis.
In a sign of the investor interest in the tiny island of 330,000 inhabitants, Goldman together with Och-Ziff Capital Management, Taconic Capital and Attestor Capital have bought almost 30 per cent of Arion Bank, the successor to the failed Kaupthing.
Iceland became one of the biggest victims of the 2008 global financial crisis when Kaupthing and two other domestic lenders imploded. The Nordic island was forced to implement capital controls to protect its currency, and only lifted these controls last Tuesday.
All three of the successor banks to Kaupthing, Glitnir and Landsbanki have been touted for sale in the past few years with no success up until now.
But a combination of rapid, tourismfuelled economic growth, relatively high interest rates and the end of capital controls has attracted foreign investors to Iceland anew in recent months.
Arion is still aiming to list its shares, perhaps in the coming weeks, with Goldman and the hedge funds given an option to increase their holdings by an extra 22 per cent before then. Kaupthing, which after its winding up in 2015 is still Arion’s biggest shareholder with a 58 per cent stake, received IKr49bn ($448.2m) from Goldman and the hedge funds in the private placement, which it will use to pay the Icelandic government its contribution to the measures that helped end capital controls.
Hoskuldur Olafsson, Arion’s chief executive, told the Financial Times: “It’s very positive not only for the bank. It’s positive that we have international investors, showing confidence and commitment in the Icelandic economy. It has recovered quite remarkably in the past few years.”
He added that a stock market listing was a possibility but said no decision hadbeenmadesofar.Arion“hascomea long way” since the crisis, its chief executive said, as it had reached a tier one capitalratioofabout26percent.
Iceland’s economy grew by more than 11 per cent in the final quarter of last year, sparking some worries about overheating as a boom in tourism showed no signofabating.
Iceland’s main interest rate is 5 per cent, significantly higher than most other western countries, adding to the attraction. But as part of the lifting of capital controls, Icelandic authorities introduced special reserve requirementsforforeigncurrencyinflows.
Paul Copley, chief executive of Kaupthing, said: “In completing this deal, which is the largest equity portfolio investment by foreign parties in Icelandic history and immediately after the lifting of capital controls, we have secured international investors with a medium to long-term view of their investment in Arion.”