A Minister of Finance and Economic Affairs discussion committee and advisors to the pension funds have jointly drafted proposals on the settlement of Housing Financing Fund (HFF) bonds, which will facilitate the winding-up of ÍL Fund (previously the HFF). The ÍL Fund project management team has recommended to the Minister that efforts be made to advance the proposals.
According to the proposals, the Icelandic Government will issue new Treasury bonds in the amount of ISK 540 bn which includes refinancing the Treasury’s debt to ÍL Fund in the amount of ISK 238 bn and settling the Treasury’s guarantee of ÍL Fund’s obligations.
The value of the HFF bonds in the settlement is set at ISK 651 bn. According to the proposals, ÍL Fund and the Icelandic Government will deliver the aforementioned Treasury bonds valued at ISK 540 bn, other securities owned by ÍL Fund valued at ISK 38 bn, and cash in domestic and foreign currency in the amount of ISK 73 bn. The Treasury will receive a part of ÍL Fund’s interest-bearing assets, in the amount of ISK 222 bn., comprising its portfolio of housing loans and other securities.
The discussion group’s proposals will be presented at a creditors’ meeting, and approval by creditors representing 75% of the total amount of claims is required for the proposed settlement to be deemed binding upon all creditors. If the proposals are approved, the Minister will seek Parliamentary approval to conclude settlement as provided for therein.
This action is expected to generate positive payment flows to the Treasury in coming years and following the completion of all measures in the settlement, the Treasury Part A debt ratio is projected to improve by at least 5% of GDP. The amount of debt backed by state guarantee will be reduced by 88% compared to year-end 2024 values. Furthermore, the measures reduce the total stock of outstanding Treasury-guaranteed and issued securities in the market by about ISK 111bn market value.
It will represent full settlement vis-à-vis bondholders, most of whom are Icelandic pension funds, and will eliminate the uncertainty relating to settlement of the Government guarantee of ÍL Fund obligations, in a manner favourable to all stakeholders.
Daði Már Kristófersson, Minister of Finance and Economic Affairs:
“It is really positive that the parties have reached an agreement on a proposal for an agreement on the affairs of the IL Fund. If the proposal is approved by creditors and Althingi, a difficult case will be concluded with the interests of all parties at heart. The proposal is based on negotiations that have been going on for over a year, working diligently to bring the matter to a successful conclusion. There is every reason to underline the importance of the negotiating committees reaching agreement on this difficult issue. The creditors of the IL Fund, which in the vast majority of cases are pension funds, are settled in full and uncertainty about the fund’s affairs is eliminated. The Treasury will also manage to stop the accumulation of debt by the IL Fund, which is of great interest to the entire public.”
Further information on the content of the proposals and further information will be published on the IL Fund website on the website of the Ministry of Finance government.is
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- Announcement- proposal for settlement engl
