Arion Bank makes good progress in tackling corporate debt

An agreement has been reached on dealing with the debt of small and medium-sized enterprises (SME’s). The agreement was signed this afternoon by representatives of the Ministry of Economic Affairs, the Icelandic Federation of Trade, the Ministry of Finance, the Confederation of Icelandic Employers, the Icelandic Financial Services Association and the Icelandic Chamber of Commerce.

The parties to the agreement believe that it represents a vital step towards attracting new investment into the Icelandic economy, which in turn will stimulate economic growth and create new jobs.
Under the agreement, the restructuring of debt of small and medium-sized companies will be significantly sped up. The goal is that by 1 June 2010 financial companies will have completed their review of the financial position of companies in the need of assistance and offered viable companies a debt restructuring package.

The methodology in the agreement is exactly the methodology that Arion Bank has followed during 2010 in its restructuring work. Arion Bank started applying this methodology in resolving the debt of larger companies (exposure above ISK 100 million) but the emphasis has now shifted to small and medium-sized companies. Around 450 companies have entered the debt restructuring process at Arion Bank so far and a solution has been reached in some 300 of those cases. Arion Bank estimates that up to another 400 companies with debt between ISK 10 million and ISK 100 million need to go through the same debt restructuring process. Arion Bank expects to have offered all these companies a debt restructuring package before 1 June 2010.