Gold­man Sachs and hedge funds take Ice­land bank stake

Financial Times Middle East - - Companies - RICHARD MILNE NORDIC CORRESPONDENT

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.”

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