As a triple B lender, Iceland will have to move quickly if it is to avoid an humiliating trip to the IMF as a bankrupt sovereign.
After the near-implosion of its banking system and a two-notch credit rating downgrade by Standard & Poor’s, word seems to have gone out to the country’s stretched corporate sector: liquidate assets and/or cut leverage; bring all spare cash home.
First up, Icelandic food manufacturer Bakkavör has sold its 10.9 per cent stake in Ireland’s Greencore.
Also, Icelandic investment group Exista plans to sell its near 20 per cent holding in Finnish insurer Sampo. The holding has a current market value of $2.2bn, although what that might be after an accelerated bookbuild by Citigroup is anyone’s guess.
Exista said it would not be selling other assets. But when these include a 24.7 per cent stake in Kaupthing, one of Iceland’s unstable banks, it is easy to see why.
Iceland’s central bank, the Sedlabanki, needs euros - fast. Its current reserves stretch to just €4.5bn and the country’s banking system needs to refinance about €10bn before year end. All of which is tricky when the Icelandic krona has fallen 40 per cent against the European currency so far this year.
Oh, and inflation is running at 14 per cent, while interest rates are stuck at 15 per cent.
Related links
Iceland May Need Some Assistance - NYT
Iceland draws up powers to take over its banks and axe executives - FT
