The loan term is 7 years, and the terms of the bond correspond to LIBOR + 0.07%. The Belgian bank DEXIA is responsible for the supervision of the issue. Financing for 2007 is completed through this issue.
Conditions on loan markets were advantageous for Landsvirkjun during the early part of the year, which lead to advantageous loans with respect to both terms and period. The company was able to meet the majority of its borrowing needs for 2007 by March 2007. This was due mainly to considerable availability of funding on markets and the company’s excellent credit rating.
As of 1 August 2007, when the effects of the US housing loan crisis began to be felt, the conditions on loan markets have been disadvantageous. Financial companies have had to write-off considerable amounts, and difficulties in the US economy have spilled over to other markets. As a result, there has been considerable risk aversion on the markets and many have held back. To make the situation on loan markets even more difficult for Icelandic companies, the overseas loan rating company, Standard & Poor’s, announced last week that prospects for the Icelandic State had been moved from stable to negative. Changes such as these have a direct negative impact on the credit rating of Landsvirkjun. Despite these adverse external conditions, Landsvirkjun managed to issue bonds on extremely advantageous terms at the same time that the guarantee premium on the Icelandic Government was approximately Libor + 0.4%.
In addition to normal financing, Landsvirkjun has access to a revolving credit agreement amounting to USD 400 million which was taken at the end of 2005 and which is intended to further support the liquidity of the company. The total financing need of the company for 2008 is USD 600 million. This means that Landsvirkjun enters 2008 in a position of financial strength and with considerable cash to dispose of.