District Court ruling in Landsbanki dispute
Today, the District Court of Reykjavik released its judgement in Landsbanki´s dispute with ALMC. The dispute mainly concerned a set-off of bonds issued by Landsbanki worth €133m and owned by ALMC. The District Court ruled in favour of ALMC regarding the bond set-off. The ruling can be appealed to the Supreme Court within the next two weeks. If neither party appeals within that period the ruling is final. This ruling is in line with ALMC's expectations and does not impact estimated recovery to bondholders.
The background of the case is that in early 2009 ALMC used these bonds to declare a set-off against certain Landsbanki claims. At that point the bonds were pledged to the Central Bank of Iceland. The Central Bank released the pledge in May 2010. On 23 May 2011 the Supreme Court of Iceland ruled that the bonds could not be used for set-off when pledged to a third party, i.e. the Central Bank. The Supreme Court did not address the issue of whether the bonds could be used for set-off when they had been released from the pledge.ALMC re-declared set-off against Landsbanki's claims with a letter dated 1 July 2011, post lifting of the pledge. Landsbanki again rejected the set-off and consequently the dispute between the parties was referred to the District Court and has now been ruled on.