State and City to Lend ISK 730 Million to Harpa Skip to content

State and City to Lend ISK 730 Million to Harpa

The Icelandic state and Reykjavík City have agreed to lend ISK 730 million (USD 6.4 million, EUR 4.6 million) to Austurhöfn-TR, the owner of the concert and conference center Harpa.

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Inside Harpa. Photo by Geir Ólafsson.

The state holds a 54 percent stake in the company, while the city owns 46 percent; the loan will be split accordingly, Fréttabladid reports.

Reykjavík City Council agreed to the loan on Thursday. In addition to the loan, contributions from the state and city towards Harpa currently amount to ISK 960 million (USD 8.3 million, EUR 6.1 million) per year.

According to the newspaper’s sources, the 12-month loan was granted with a seven percent fixed interest rate and is to be repaid when Austurhöfn-TR has guaranteed refinancing, which is to take place in the first quarter of 2012 with the issuing of commercial papers.

To fully complete the refinancing of the companies that own and operate Harpa and other construction lots in the area, the issuing of commercial papers must amount to ISK 18.3 billion (USD 159 million, EUR 116 million), Fréttabladid states.

The loan to the concert hall’s owners is granted, among other reasons, because a joint loan from banks which was taken in 2010 did not suffice to fully finance the project. The new loan is supposed to bridge the gap, excluding the final completion of a few spaces.

Part of the loan will go to Situs, the subsidiary of Austurhöfn-TR which owns other construction lots in the area, and part to the operation company Ago.

In a memo from Austurhöfn-TR to its owners, submitted to Reykjavík City Council, it says that by waiting with the refinancing of Harpa until next year, the company’s representatives hope that the terms will improve. Reykjavík City Council agreed to the loan with four votes to one.

Originally, the joint loan, provided by Landsbanki, Arion Bank and Íslandsbanki, was to be refinanced. The memo states that there was an ISK 17,093 million (USD 149 million, EUR 108 million) roof on the joint bank loan.

However, the estimated total cost of Harpa’s construction, operation until refinancing takes place and the cost of other construction lots is higher than the maximum amount.

The total cost of Harpa and related projects, including cost that has been written off, is estimated to be ISK 27.7 billion (USD 241 million, EUR 175 million).

When agreements on the building’s construction were signed in April 2002, the estimated cost was ISK 6 billion (USD 52 million, EUR 38 million).

Click here to read other recent news about Harpa and here to read about the Icelandic state and Reykjavík City taking over Austurhöfn-TR.

ESA

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