Two companies with significant holdings in Icelandair Group have had assets seized due to financial difficulties – leaving Islandsbanki Bank with a 47 percent share in Icelandair Group.
The Bank points out in a press statement that Icelandair Group is not at fault in the collapse of two shareholding companies; and claims to be relatively happy with the situation:
“Icelandair Group’s operations have gone better than expected in the first quarter. Over recent months, the company has been working on a financial reorganisation in collaboration with Islandsbanki. The project is going well and the Bank wants to continue its co-operation with the current Icelandair management,” the statement reads.
Icelandair Group will continue to be traded on the Nasdaq OMX stock exchange in Reykjavik and Islandsbanki intends to sell its stake on the open market at a time best suited to all stakeholders.
Iceland’s Financial Supervisory Authority (FME) has granted Islandsbanki short term permission to hold its 47 percent stake in Icelandair Group; but the Bank must reduce its holdings to 30 percent or less as soon as possible.
The two companies, Mattur Investment ehf. and Naust ehf., used loans from Islandsbanki to buy investments, making it relatively simple for the Bank to seize those investments in the event of the companies’ default.
So, Glitnir changed the name back to Islandsbanki after they bankrupted the Icelandic economy last October. Is there someone who can believe anymore to the banks of Iceland?
Wow!! who are they tryng to decive, this only means one thing Icelandair is bankrupt. If share holders of a company can not renegotiate their debt based on the assets of the company, that means that company is not worth it, so you just take whatever you can take now before its even worthless
@ Easy:
Not quite true I think – the bank loaned the money which was used to buy the shares and the shares themselves were the collateral for the loan.
So if the loan cannot be repaid, the bank seizes the shares – this is how it was supposed to be and how it actually worked out…
One more asset for the germans, and all forignar claim owners.
Is it true that Iceland introduced a law for the nationalised banks saying that all the assets of the banks should first be used to pay-off retail depositors (or was it just Icelandic retail depositors)as opposed to other creditors – such as KSF Isle of Man, who are supposed to have the benefit of a guarantee from Kaupthing hf? If so, this is highly unjust. It is one thing for governements to use taxpayer’s money to compensate eg retail depositors, but another to change insolvency priority rules to allot all the assets of eg a bank to one class of creditors leaving the rest with none. Am I understanding this right?
Somebody pleaseee!!! make the clock faster or close the banks earlier before the krona looses more value today!!!!
Lets present it with a real Title, not just rying to present it like a very very very good thing.
http://www.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUSLI61687420090518
I dont thing Islandsbanki GAIN something, since when not geting paid means gaining?
I posted a brief analysis of Icelandair’s accounts last week on a previous item (Icelandair beating expectations). Alex seems to have “censored” it, so I’m attempting again below. My conclusion was that it was the funding of the company that was the big problem. The equity stakes seized are basically worthless.
——-my post from 12 May—————-
Oh, gimme a break – when will Icelandic companies realise that people can read a balance sheet? This is just like the banks the moment before they went bust!
First of all, what does it mean that they beat expectations? Whose expectations? Their own! And their own said that they expected things to be terrible, so now that they are just plain bad then they can say that they beat expectations.
Go and look at the figures.
Forget Icelandair’s P&L statement – it is a fiction. What is worse is that they keep quoting profit before interest payments. Why is that significant? Go to the balance sheet page. This is simply horrible.
This shows 98 billion in assets. Great you say! But 29 billion of that (about 30%) are “Intangible assets” – or to put it another way “Assets that don’t exist in reality”. So WHAT they OWN is not as great as it seems.
Look at the other side of the coin – where did the money come from to buy what they own: this shows just 17 billion of shareholders equity and a massive 81 billion of loans! That’s awful. But it gets worse: 57 billion are CURRENT liabilities. That is to say they are due to be paid back within 12 months. Aaaagggghhhh!
(And imagine the interest payments needed to service such a huge debt – that is why the company happily quotes its profits BEFORE interest payments.)
Also compare 17 billion of equity with 29 billion of intangible assets: result – the shareholders own fresh air! Zilch! Nada!
The company admits it is trying to get rid of the Intangible Assets from its books but if it did that today it would wipe out the shareholders and the company would be bankrupt.
Equally, the company has a horrible repayments profile on its debts. They are desperately trying to reschedule these. (In plain language Icelandair is saying “Hello creditors. Yes we know we must pay back 50 billion this year. Would you mind if we put off repayment for another 5 years or so. We’ll continue paying the interest. And then you’ll get your 50 billion back. Honest!”)
The cash flow statement (which tells things as they really are) is simply bad. My guess it looks better than it does because they have managed to refinance a debt with a new issue of some sort (I’ve not looked in detail, just scanned). I would like to see a breakdown of those numbers. You would probably faint if you saw the details.
So end point: you can forget new routes, passenger numbers etc. Icelandair has excatly the same problem as the entire country: huge debts which need to be repaid. And just like the country the assets to hand to repay the debts fall short of what the company actually owns. The question is not one of profitability but insolvency. It is a question of refinancing in some shape or form.
On the positive side, the debt situation as not as completely hopeless as many other Icelandic companies, it’s just merely bad, or very bad, ie insolvency. Probably they could survive for a few years by selling a lot of planes, or renting them to China, or setting up routes to Mecca – people will always need to go to Mecca. They only need to sell 5-10 billion of assets to service the debt. Or the government could invest / inject some newly-printed money into the company and pay employees with this Monopoly money.
I think if you add up the other “new bank” holdings, the government ownership of the airline actually increases to 70-80%.
In the meantime the real game – the negotiations with the foreign creditors – is being played offstage while everyone watches Eurovision.
“STOCKHOLM, May 12 (Reuters) – Iceland said on Tuesday negotiations with creditors on the division of assets of its failed banks had been held up due to problems valuing the assets of the new banks set up after the country’s financial meltdown.
Informal talks on the valuation of the assets and liabilities of the failed banks have begun, but a final deal with creditors could now very likely be delayed by a few weeks, Indridi Thorlaksson, Permanent Secretary at the Ministry of Finance. “The boat has been heavier than expected.”
Restructuring and rebuilding the bank sector and repaying creditors as well as stabilising its currency, the Icelandic crown, are key parts of the $10 billion rescue programme agreed with the International Monetary Fund and Iceland’s European neighbours last year.
Iceland’s Financial Supervisory Authority had said the “old banks” and creditors would be compensated with payments made in the form of a bond issued by the new banks based on a net asset value set by Deloitte & Touche.
The biggest issue now is the risk that remains on the balance sheets of these so-called new banks. The government may have to provide equity to remove that risk, so that creditors are sure those bonds will be repaid.”
That last paragraph doesn’t make much sense but it appears that the foreign creditors want “equity”, ie real assets – the assets originally secured by the foreign bonds (fish, energy, buildings) – not some paper IOU issued by the gubment.
It’s clear that the IMF is running the show and are are acting as the debt-collectors for the big foreign creditors. Out with the domestic kleptocracy, in with the foreign economic occupiers.
And Kringland acctually more that that Landic Property is next, but looks like it will go straight to germans, they will skip the show of nationalizeing it and then give it away.
Does it really make a difference who own Kringlan and the other Landic properties? I dont know who Landic is, but they probably belong to the group of a-holes who ruined the country, they took their rent money out of the country and bought ski-houses in France and apartments in London and drank champagne in Qatar and bought yachts cocaine and prostitutes, that sort of thing, but not all the money – some they spent in Iceland but only enough to let people know people how rich they were. Hypo-Bank is essentially owned by the German gubment now so really, Kringlan is “Bundeseigentum”, maybe they should just write PROPERTY OF THE GERMAN GOVERNMENT on the front of the building. The prices at the stores at Kringla will stay the same whoever owns the building and maybe now you get a nice selection of goods from Bavaria. At least the Germans won’t make a big show of it and put their money in your face to try to make you feel poor because you didn’t join in the Icelandic Economic Miracle with its Special Icelandic Conditions.
And Icelandair will probably fall into the hands of Lufthansa soon enough, but what difference will that make either? Probably none, and maybe it will be better, Lufthansa is a good airline. Iceland will be a German hub for flights to the US and Japan and there will be lots of tourist groups from Germany, old folks from Bavaria, who will drive to Thingvellir in German-built buses and then stay in Bundeseigentum hotels and shop at Kriglan. And probably there will be a big German “adventure tourist” business where Germans rent Opels and drive the ring-road, just like all the thousands of Germans who race up the highway in Finnmark to Nord-Kapp, a crappy useless rock at the end of the continent, without stopping or even looking out the window. Better to be a German colony than a British or American one, at least you get lots of good cheap beer and Sauberkeit and the transportation runs on time.
I TOLD MY FRIENDS THAT I BOUGHT LIKE 100.000 ISK IN CLOTHES… WELL, ROUGLY LESS THAN 600 EUROS… SO IT WAS INCREDIBLY CHEAP!!!
ICELANDAIR IS GOING TO BE TRANSFERED TO FOREIGN CREDITORS SOON, AND IT WILL BE CALLED BANANAREPUBLIC AIRWAYS…
TRANSLATION: ICELAND IS CHEAP AND RUINED… NOW IN THE SUMMER THE KRONA WILL LOSS MORE VALUE, THIS DAYS IS ON ITS WAY TO 200 ISK / 1EURO, IN TWO WEEKS WILL BE 250 IKS PER EURO OR WORSE. IT WILL REACH 350 IN SEPTEMBER. FOREIGN CREDITORS WILL GET ANGRY, THEY WILL TRY ANY POSSIBLE WAY TO HAVE THEIR MONEY BACK.
NOW WHAT IS HAPPENING IS THAT CREDITORS ARE REAPING WHAT IS LEFT OF ICELAND TO JUST TRY TO GET SOMETHING. THE GOBERMENT IS PUTTING EVERYTHING IN THE HANDS OF FOREIGNERS, WHO ARE NOW THE REAL OWNERS AND LORDS OF ICELAND. AND THEN BY THE BEGINNING OF 2010 PEOPLE WILL GO TO THE STREETS AGAIN TO ASK FOR A NEW GOBERMENT OR SOMETHING TO HAPPEN.
THERE IS NOT A SINGLE COMPANY IN ICELAND THAT IS WORTH SOMETHING, AND IF THERE IS ANYTHING WORTHY IT IS BEING PUT IN FOREIGN HANDS.
MASS MIGRATION IS INCREASING, EVERY WEEK MORE AND MORE ICELANDERS ABANDON THE COUNTRY…
Mike (UK Nordic analyst), so Icelandair is like all of the other ex state run airline and not making money because people arent buying expensive flights.
Whats new about that?
British Airways, American Airlines and Iberia figured out they cant go it alone with they huge staff cost so want to get themsleves effectively a nice new monopoly. You read they nice “intangibles” balance sheets and also you have to cry at amount of staff pensions they have to pay now employee they add as state monopoly finally retire.
IcelandExpress doing fine, just added London Gatwick route last month instead of Stansted.
http://www.dohop.com also doing fine.
So Íslandsbanki called in it loan collateral and tooks shares in Icelandair now it goes from 5% owner to 47% because it had to. Big deal.
Investors will buy that 17% they have to sell soon enough and then later make they profit.
Despite my dislike of it, Icelandair has always had business as it flies in useful route with Iceland in between North America and Europe. This will not change.
FISY: “Despite my dislike of it, Icelandair has always had business as it flies in useful route with Iceland in between North America and Europe. This will not change”
NOBB, THAT WONT CHANGE, THE ONLY THING THAT “HAVE CHANGED” IS THAT ICELANDAIR IS ON FOREIGN HANDS NOW… LIKE THE MOST OF ICELAND…
BANANA AIRWAYS
Fisy,
You fail to demonstrate even the simplest knowledge of financial affairs. But you are not alone in Iceland.
First of all, you talk about the deposits that were frozen as if they were assets of the banks, and more specifically assets that could be deployed in Iceland. As far as a bank is concerned the deposits it takes are a liability – they can be demanded back at any time by the depositors. This is because the money on deposit does not belong to the bank, it belongs to the depositors.
Secondly, as I’ve posted before Kaupthing was insolvent by the start of 2006. The decision to become a deposit-taker in the UK, Holland and Germany was a move that they hoped could fill the holes of their loss making activities. Yet when that decision was announced, the three banks, the Icelandic government and FME were informed that in any time of stress they could not use those deposits to shore up the banks balance sheets: no sovereign state would allow the money of its citizens to be moved out of the control of the national supervising authorities and into Iceland. The was communicated at the end of March 2006 at a two day meeting organised by the Icelandic Chamber of Commerce held in London at the offices of Barclays Capital. Recommendations to the Icelandic authorities made at that time were rejected. Just to re-iterate Kaupthing was dead at that time, it was insolvent, but the accounting standards within Iceland (somewhat lax ones) allowed the bank to consolidate the money held outside Iceland and to match it with the losses within Iceland. This (like much of Icelandic accounting) was a pure fiction. The fiction was revealed when all European countries with the necessary legislation froze the accounts in their respective countries. Darling, Brown etc had nothing to do with the collapse of Kaupthing – this was caused by a combination of irresponsible risk-taking, a huge appetite for debt, a hands-off government and a largely powerless supervisory body (the FME).
Now let’s look at Icelandair. Here you demonstrate a particularly common Icelandic trait – if something Icelandic is under threat then talk about something else. You mention British Airways.
OK, here are the accounts for 2007/8
http://www.britishairways.com/cms/global/microsites/ba_reports/fin_statements/fs_income.html
It doesn’t really matter that they are a year old – the figures are largely the same. You will see that these accounts show an operating airline. It has some gearing, perhaps a bit too much, it has real assets, it has a healthy cash flow. In short this is an airline.
Now go back to the Icelandair accounts. These do not describe an operating airline. They show a massive investment vehicle which has taken on huge amounts of debt and is attempting to service that debt by flying a few planes. These accounts show a highly speculative and risky financial company with a small airline attached on the side. The company has no net assets, its cashflow is barely capable of supporting the debt burden, and shareholder value is zero.
If you aren’t convinced by that I would recommend that you look at the accounts of other Icelandic companies. Here are the accounts for Eimskip for 2007
http://www.eimskip.com/PortalData/1/Resources/financial_results/Annual_Report_2007_LQ_final.pdf
Go to page 33 – another “House of Horrors” balance sheet. The company claims to have 2.4 billion Euros in assets. But note that they are carrying 0.4 billion in Goodwill (this is a “fresh air” asset that should have been written off a long time ago). So really, if you were to try and value what the company has it is actually about 2 billion Euros. Now look at the other side of the balance – “Where has the money come from to buy those assets?”. This shows 0.4 billion in shareholders equity and 2 billion in debts. So – how much are the shares really worth? You can match the items up easily: 2 billion of real assets bought with 2 billion of debt, and 0.4 billion of fresh air bought using 0.4 billion of the shareholders money. Is that fresh air really worth 0.4 billion? No. So why hasn’t it been written off? Because, just like Icelandair, if you did that the company would instantly be bust.
Both Icelandair and Eimskip are not going concerns – they are being kept alive as commercial operations by lax accounting standards.
Often I hear Icelanders talking about “profits” as if this represents something good. Well, as any undergraduate business student will tell you profit is an opinion (look it up). Profits can be manipulated very easy by the use of non-cash accounting items. (The classic case is depreciation – if you decide that your assets have depreciated less this year than last then you can boost you profits. Nothing else has changed. You did the same amount of business and your cash position remains unchanged, but hey! we made a profit! There are literally hundreds of ways of doing this, and Icelandic companies have provided a host of MBA case studies for future students.)
Hey, let’s show you one – just so you might believe I know what I’m talking about. Let’s look at Exista’s quarterly accounts for the first quarter of 2007 (a time when Icelanders were happily telling the world how good they were doing). The accounts can be found at
http://www.exista.is/Uploads/document/2007/Exista_Interim_Accounts_Q1_2007.pdf
Look at page 5 of the accounts. This shows the balance sheet. You will note two things. On the top line there are Fair-value assets (these are assets which are valued according to the market price they would fetch – so this is an accurate number. Count the number of shares in the asset, multiply by the market price and you get the fair value). From Decmeber 2006 to March 2007 these drop from 2.2 bilion Euros to 0.8 billion. Oh! That’s a big loss! But hang on, look down at the fifth line. This is the rather mysterious “Investments in associates”. In December 2006 Exist had ZERO investments in associates yet three months later they had 4.4 billion Euros worth. Where the hell has that come from? What is it? Look at Note 18 to the accounts, this shows that the accountants have shifted some of the assets from the top line to fifth line and created a completely new asset class. Why do that? The answer is simple: the market value of those assets was collapsing. On the 31st March (the accounting date) this didn’t show up as a big difference. So look at the accounts at the year end:
http://www.exista.com//Uploads/document/Account.pdf
Look at Balance sheet on page 5. Again on line 5 is this mysterious new asset class worth 4.7 billions. Wow! Those assets have increased in value by 0.3 billion Euros. Great work guys! But now look at the Note 24 (on page 30). In small figures this shows that the difference between the Fair-value and this new “magic” value is 992 million Euros – or in round terms one billion Euros. So the reality of the situation is that by reclassifying some market-valued assets as a completely spurious “Investement in associates” the accountants have managed not only to increase the Balance sheet by 300 million Euros, they have also been able to hide a loss of over one billion Euros through this trick.
Within Iceland these results were hailed as wonderful – clearly no one in Iceland took the time and effort (or had the ability) to read these assets. We read them and we were horrified.
I could repeat that sort of analysis a hundred times over, going all the way back to the accounts for deCode Genetics when it was first set up in 2000/2001. (And who was the CFO of deCode at the time? Hannes Smarason. I met him at the time – he didn’t know what he was doing then. He went to FL and spun off Icelandair and created an “investment vehicle”. That was a pure joke.)
Why oh why, are you attempting to defend the indefensible Fisy? Just accept that your country, companies, and indeed a large number of individuals are bankrupt and get on with fixing the situation. (By the way – we know what is going to happen to the country. You can do it as well. Just sit down with a good single malt, a note pad and the big numbers. You can map out the general development quite easily. I can’t understand why your own universities, business schools or government haven’t done this yet.)
I really do wish you well, I like Iceland and Icelanders immensely, but you really need to touch base with reality. The last seven years of Icelandic history have been a true Greek tragedy – Hubris followed by Nemesis.
All the best!
PS I was quite pleased when you got second in Eurovision.
Fisy
Here at the financial results for BA published this morning.
http://www.bashares.com/phoenix.zhtml?c=69499&p=irol-newsArticle_Print&ID=1291428&highlight=
With your keen eye for financial data you will see that these are the accounts of an airline.
The Icelandair figures are those of a hedge fund which has gone horribly wrong.
I’ll tell you the difference between the two. If you went to the office of the CEO of BA he would be discussing his operations, cash flow, routes, load factors, fuel prices etc. If you went to the office of the CEO of Icelandair he would be discussing his balance sheet, refinancing, maturities, bond rollovers and debt servicing.
Oh, three posts – I’m becoming a geek! Possibly the oldest geek in the world.
Just in case you think I’m getting at Icelandic companies here is an article in Bloomberg addressing the vey issue I’ve highlighted in regard to Exista – namely the issue of “fair value” or “mark to market”. Both these refer to reporting the value of an asset according to the current price of the asset rather than some notional “long term” (i.e. fictional) value. Where Icelandic companies have blazed a trail the rest of the financial world wants to follow!
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a_mx7VgF6TFk
This is a rather satirical take on the issue, suggesting that a new accounting body (Freebee) should be allowed to operate from the Cayman Islands.
Seriously, the need to report “fair value” in accounts is not necessary – any analyst can work out the true situation since market-valued assets are publicly known. It is a similar situation to taxation – Tax authorities ignore published accounts because they know that they are largely false. Tax offices use their own analytical tools to establish the tax payable by a corporation.
Any at one point the article says:
“From its sunny headquarters at a mail-drop in the Cayman Islands, the Free-Bee would gather the best and brightest minds from the planet’s greatest financial catastrophes to create a new set of free-market standards. Lehman Brothers, Royal Bank of Scotland, American International Group, Fannie Mae, the nation of Iceland — their former brain trusts all would reside here.”
I other words Fisy says:
No, No, NO, everything is ok, everyting is, was and will always be ok, please somebody tell me that everything is ok!!!
Dear Mike
Thanks for your very informative comments. As a depositor in KSFIsle o’Man I have been trying to understand how come KSFUK seem to have managet to have lost about half their assets – based on a proposed 50% return to creditors. What have they been up to. Trading insolvently? Since when? Should the UK FSA have stopped them and their directors? How long ago?
Thanks for any assistance
A team of 20 investigators, FME , finalcial crime division and police raided 10 homes and offices today 22.5 including KB, Samskip and Kjalar in connection with a investigation in busyness regarding Q Iceland Finance ehf who bought 5,01% share in KB just before it fell, house searches where made in 7 places today and 3 last Tuesday, Q Iceland Finance ehf. is owned by Ólaf Ólafsson and Mohamed Bin Khalifa Al-Thani sjeik.
The special prosecutor says that the reason is alleged market manipulation and possible violation of laws when KB shares where bought in the end of September 2008. a substantial amount of money is involved and the investigation involves a lot of people, interrogations have started and some people have the status of suspect.
The operation started with a search in 3 places at 10 o’clock this morning.
2 companys registered in the Virgin islands got a loan from KB and used it to fund the third company Q Iceland Finance ehf who then bought the KB shares using them as collateral for the loan, one of the Virgin islands company’s is owned by Ólaf Ólafson who was the second biggest KB share holder at the time, the story was as i remember it that this AL Thani brother of some Emir in Quatar was supposed to have bought 5.1 % in KB for 25.5 bn isk
in October but in January this money was nowhere to be found, no one mentioned any loans at that time.
The tax office is investigating some 500 companys related to the crash, more than half of them are offshore,
FME sent 10 cases to the prosecutor a few days ago, in one of them they investigated 800,000 emails,
Kb seems to be more shady than i expected,
strange things have been going on in Exista and FL group aswell,
what Mike is saying is probably mostly correct,
Mike.
Yes, it is, Mike (aka the oldest geek in the world). And rather stupid one. I mean stupid take not geek ;-) Comparing Lehman and Iceland? Excuse me!
There is nothing wrong with Iceland. It is the current “financial” system that is not functioning any more. Iceland was just the first that exposed it in full – as “government” could “bail out” crooks. But it’s only a matter of time when same happens in the “pillars” of current financial world – USA, Britain, Germany, Japan etc.
PS. Looks like China is just waiting for the right moment to come and “rescue”…he-he
In courtesy I have split up your post and reply to you early comments about Kaupthing to the thread where it belong tomorrow expect:
http://www.icenews.is/index.php/2009/02/06/the-banking-crisis-in-iceland-in-2008/
But first to you posting about Icelandair. I enjoy you posts Mike you one of few that take time here, other include Niels, Brumley86, Physchim62 who put real efforts for us other reader, and some other like Axel, Ólafur, Alexander E. who post sensibal and others unfirtunatly long gone in posting because I think mainly of this ALL CAPS man — yes you Gus, and other less content drivel poster like Peter – London.
On May 20, 2009, Mike (UK Nordic analyst) said:
>Now let’s look at Icelandair. Here you demonstrate a particularly common Icelandic trait – if something
>Icelandic is under threat then talk about something else. You mention British Airways.?
Stangeley enough I mention another airline that also national flag carrier and one you know I expect coming from UK. My comparison specificly mainly about this underlying performance and this intangible asset which is not uncommon in accounts of airline at all.
Here is PDF of Annual Report I think Mike refer to:
http://www.icelandairgroup.com/servlet/file/ICE%2045159%20AnnualReport%202008.pdf?ITEM_ENT_ID=228086&ITEM_VERSION=1&COLLSPEC_ENT_ID=653
Auditor are KPMG. This figures Mike talk about is on page 30-74 of the PDF in general.
>This shows 98 billion in assets. Great you say! But 29 billion of that (about 30%) are “Intangible assets” – or to put it another way “Assets that don’t exist in reality”. So WHAT they OWN is not as great as it seems.
Intangible assets detail is shown on page 52 of notes to accounts:
Total intangible is shown as 37,159 of that:
Goodwill total: 26,001 plus Other intangibles 2,278 which I guess is how you get you figure.
In introduction they say:
“Our net loss of ISK 7.5 billion does not reflect the performance
of the core operations as the impairment of intangible
assets totaling ISK 6.4 billion dominated the result.
The EBITDA for the year, which amounted to ISK 4.8
billion, gives a better indication of how the core business
performed and highlights the fact that it coped well. The
EBITDA result in Q3 2008 was ISK 6.2 billion, the best in
the company’s history.”
“Impairment of intangible assets amounted to ISK 6.4 billion
in 2008, all accrued in the fourth quarter. The Group’s
intangible assets have been allocated to individual subsidiaries.”
“Icelandair Group’s total assets as of 31 December 2008
totaled ISK 99 billion. Total assets increased by 48% from
ISK 67 billion between years despite an ISK 6.4 billion
impairment of intangible assets. This increase in total assets
can be mostly attributed to the weak ISK and the consolidation
of Travel Service. Operating assets totaled ISK
36.8 billion and consist mainly of aircraft. Intangible assets
amounted to ISK 29.3 billion, an increase of ISK 2.5 billion
which can be explained by the consolidation of Travel Service
and the weak ISK.”
>Look at the other side of the coin – where did the money come from to buy what they own: this shows >just 17 billion of shareholders equity and a massive 81 billion of loans! That’s awful. But it gets worse: >57 billion are CURRENT liabilities. That is to say they are due to be paid back within 12 months.
In note 30 on page 57 it say:
“Total current loans and borrowings 20,735.” not 57 billlions?
on page 58 it say:
“At the end of December 2008 loans and borrowings due within one year amounted to ISK 20,735 million. Thereof 4,560 million are current
maturities of long term loans and 16,175 million are revolvers and other short term loan facilities. At the same time the current ratio was 0.4
which is below the Company‘s target. The Company is working with its commercial bank, New Glitnir, on improving its debt maturity profile.”
Yes they have debts in USD and EUR so maybe that is what gone up but I don’t see same figures to what you are saying.
It is lousy to have to pay for fuel in USD for ISK airline but considering it this result is not so bad at all.
They say this core business of airline and not travel agency stuff, etc. EBITDA is healthy. It looks that way compared to how things are for airline in the world during this time.
>OK, here are the [BA] accounts for 2007/8
Let’s talk about comparable time which is British Airways Year April 1, 2008 – March 31, 2009 just out in summary form:
(“Company’s Annual Report and Accounts, which will be available at our website www.bashares.com from June 8, 2009.”)
http://www.bashares.com/phoenix.zhtml?c=69499&p=irol-newsArticle_Print&ID=1291428&highlight=
“Intangible assets March 31 2009
Goodwill 40
Landing rights 205
Software 22
Total 267″
In they introduction:
“Group revenue in quarter 4 was down 8.4 per cent to £1.9 billion on operating costs up 13.3 per cent, resulting in an operating loss of £309 million. Excluding fuel costs and the impact of exchange, operating costs were down 5.5 per cent in the quarter. Quarter 4 loss before tax was £331 million. Passenger revenue for quarter 4 was down 8.0 per cent. Yields were down 2.5 per cent, down 16.0 per cent excluding exchange.”
“The economic downturn led to a significant fall in global demand for premium travel, with IATA premium traffic down around 14 per cent (our premium traffic was down 13 per cent), in the second half of the year. Our premium traffic volume, which started to see some weakness back in August, has steadily declined in the second half in response to the economic slowdown. Significant pricing actions were required to stimulate non-premium traffic volumes, which were broadly unchanged year on year.”
So if we take off this “impairment of intangible assets totaling ISK 6.4 billion” and look at core business of airline of Icelandair it looks like they did not bad compared to BA.
BA value its landing slots very highly 205 millions — are the intangible value of those really worth that much? Maybe.
What this goodwill is that Icelandair is the only major airline in and out of Iceland and being the flag carrier which is not same as BA which while it does have its reputation is not the only one operating to UK etc, but is Icelandair goodwhill worth that much, well maybe not as you point out.
But call me dunce but this Icelandair use of EBITDA seem to be because they audience is expected not to be the shareholder in street but private equity people. They include all other information in there to make judgement as usual juicy stuff being in the notes to accounts.
So what you think that Icelandair should be using? EBITDAR instead? Or what?
I think you point about intangible asset is reasonable but Icelandair very clearly an airline based on it results of actual operations that is doing better than most.
*Iceleandair total intangibles ISK 37 billions is approx GBP 180 millions.
Icleandair goodwill total: 26,001 billions = GBP 129 millions.
BA goodwill listed as GBP 40 millions.
BA landing slots intangible listed as GBP 205 millions.
This post is childishly entitled “I told you so”.
Icelandair is busy disposing of assets trying to raise money. The third quarter results were published recently (no, I won’t bore you witless with an analysis of them). The CEO has posted a statement on the website.
http://www.icelandairgroup.com/investor-relations/news/detail/item367374/CEO‘s_comment/
At one point he writes:
“Our main focus all this year has been the restructuring of the Group’s balance sheet. It has been clear for a long time that leverage needs to be decreased, liquidity improved and the equity ratio strengthened. ”
On 22 May I wrote on this page:
“If you went to the office of the CEO of Icelandair he would be discussing his balance sheet, refinancing, maturities, bond rollovers and debt servicing.”
Gee! It’s as if I had been in the guy’s office :-)
Fisy – I don’t want to keep “getting” at you but please wake up and stop trying to defend the indefensible, blaming someone else, or trying to deflect by talking about someone else.
And sorry to everyone else: I can’t really do one liners!
I support my friend Fisi 100,000%!
It is obvious to any rational person (including me) that Fysi’s detractors are jealous they are not Icelandic. We are famous around the world as beautiful, intelligent, and immensely strong. I, for example, can bench-press 200 kilos of gold bullion.
Afram etc.,
Gummmi
Mike (UK Nordic Analyst )
>Fisy – I don’t want to keep “getting” at you but please wake up and stop trying to defend the indefensible, blaming someone else, or trying to deflect by talking about someone else.
I take no offense at you posts because they do have always meat in them. But it was not in any way deflecting to compare Icelandair balance sheet in detail with Iceland air’s as above.
As an analyst I am sure that this is your ” bread and butter ” of comparing companies balance sheets and cash flows across sectors.
I am sure that you would not invest ( buy ) stocks unless you could compare with other airline in same sector.
>“If you went to the office of the CEO of Icelandair he would be discussing his balance sheet, refinancing, maturities, bond rollovers and debt servicing.”
>
>Gee! It’s as if I had been in the guy’s office :-)
Yes, and notice that I was not posting about that.
What I was posting about was an objection to the facts from accounts where you did say this about Icelandair :
“>These do not describe an operating airline. They show a massive investment vehicle which has taken on huge amounts of debt and is attempting to service that debt by flying a few planes. ”
So, instead of just rehetoric I gave examples of why I did think your asserting of this was not correct given actual figures in accounts.
What I posted about was comparison about this underlying performance and this intangible asset which is not uncommon in accounts of airline at all.
I think you point about intangible asset is reasonable but Icelandair very clearly an airline based on it results of actual operations that is doing better than most.
The facts and figures is what is of greatest interest to me in all of our discussions because it is that which gives most meat and credibility to you postings when you are debating with people like me.
And I expect to other readers of posts too.
Interesting (very belated) official confirmation of Mike’s point about Icelandair and Einskip:
“They bought firms in good standing, like Eimskip and Icelandair, and in a matter of years they had transformed them into empty shells encasing a pile of debt.”
http://grapevine.is/Features/ReadArticle/Where-Is-He-Taking-Us
http://grapevine.is/Features/ReadArticle/Where-Is-He-Taking-Us
Steingrímur J. Sigfússon’s comments were interesting – giving an insight, other than the crude musings of ‘The Dear Leader’ Grimsson – currently flirting with China and Russia.