The sole purpose of Byr Savings Bank, post composition, will be to preserve its assets and solve outstanding disputes, so that it will be able to distribute its assets, net of stability contribution, to the holders of its debt instruments and guarantee capital.
The disputes are for two claims filed, which the Winding-up Board rejected, but were not resolved prior to composition. The claims are from Íslandsbanki hf. and Héðinsreitur ehf.
The claims were filed as priority claims and their total amount exceeds the Bank's total assets. Their results can therefore have a significant effect on the Bank's ability to repay its debt instruments.
When Byr Savings Bank was taken over by the Financial Supervisory Authority (FME) in 2010, the FME transferred its operations to a new bank, Byr hf. It was first fully owned by the Icelandic government, but in a later settlement Byr Savings Bank acquired 88,4%.
The Icelandic government and Byr Savings Bank sold their shares in Byr hf. to Islandsbanki hf. in 2011 and by year end Byr hf. had been merged with Islandsbanki hf.
In 2013, Islandsbanki hf. filed claims with the Icelandic government and Byr Savings Bank, claiming that a part of the loan portfolio in the financial statements of Byr Savings Bank for the year 2010 had not been valued in accordance with International Financial Reporting Standards.
The claim on Byr Savings Bank amounts ISK 7.335 million plus interests and is claimed as a priority claim per Art 110 of Act no 21/1991 on Bankruptcy.
The dispute is now with the District Court of Reykjavik. The Court appointed two assessors in April 2014 to answer questions that Islandsbanki hf. requested and we are waiting their results.
In 2007 Byr Savings Bank agreed to fund a construction project that Héðinsreitur ehf. planned to build on a lot in central Reykjavik, called Héðinsreitur. This was a complex with 174 apartments for the elderly and was to be sold to them as co-operative apartments. Meaning that they would pay 30% for the interest relief (subsidy) and then monthly lease and maintenance fees, but the apartments were to be owned by Héðinsreitur ehf. The Bank withdrew from funding in 2008 due to the financial crisis in Iceland and the fall in the housing market that followed. Héðinsreitur ehf. sued and the District Court of Reykjavik rejected, but the Supreme Court of Iceland agreed that this was a breach of an agreement.
Héðinsreitur ehf. filed a claim with Byr Savings Bank, claiming ISK 3.000 million plus interests and expenses. The claim was filed as a set-off claim (per Art 111) against a loan that Héðinsreitur ehf. has with Islandsbanki hf. and the rest as a general claim (per Art 113).
The dispute was sent to the District Court of Reykjavik and valuators appointed who ruled in 2014 that even though there had been a breach of an agreement, no loss had occurred as the project would have resulted in a loss for Héðinsreitur ehf.
Héðinsreitur ehf. requested reassessment and they delivered their report in September 2016. The proceedings will now continue with the District Court of Reykjavik.