US money market funds redeem billions of króna of Icelandic debt Skip to content

US money market funds redeem billions of króna of Icelandic debt

In a prominent story on its front page, Morgunbladid reports that US money market funds have called in billions of ISK denominated bonds issued by the Icelandic banks.

According to Morgunbladid, the term of the bonds is 5 years, but they are rolled over on monthly basis. Recently, bondholders have canceled at least ISK 50 billion worth of debt which is payable with 13 months notice. Kaupthing (KB-Bank) is responsible for ISK 43 billion and Landsbanki for ISK 7 billion of the ISK 50 billion. A spokesperson for Kaupthing said the cancellations increased the bank’s borrowing need in 2007 by 25%.

No information was available for Glitnir (Íslandsbanki), but a spokesperson said to Morgunbladid that only a “minority” of its liabilities towards money market funds had been canceled. Morgunbladid estimated Glitnir position vis a vis money market funds at over ISK 70 billion.

Morgunbladid quoted Gudni Adalsteinsson at Kaupthing saying that the bonds had been canceled because of “volatility in the secondary market”. “We have always known that it was not certain these funds would last the full 5 years, and we have taken that into consideration,” said Gudni to Morgunbladid.

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