In an extensive article on Iceland’s progress, the international financial data and media company Bloomberg quotes Arion CEO Höskuldur H. Ólafsson saying that the outlook is positive for the bank to successfully pull off the Eurobond issue.

Iceland is now recovering from letting its banks collapse with USD 25 billion debts in 2008, while the Eurozone is getting into worse trouble; and Iceland’s CDS (Credit Default Swap) rate now shows it costs less to insure Icelandic debt than Eurozone debt, Bloomberg reports.

Höskuldur believes this information is encouraging the three new domestic banks carved out of the remains of the collapsed ones to investigate their international potential. A lot of things in Iceland are going well, compared to the rest of Europe, he says.

By way of illustration it is pointed out that Arion Bank has a capital adequacy ratio of 21.4 percent, compared to the FME financial regulatory authority’s 16 percent target and a legal minimum of 8 percent.

Arion (formerly Kaupþing) is 13 percent in the hands of the Icelandic state and 87 percent owned by Kaupþing creditors and the bank says it is talking to international ratings agencies to get a credit grade.

“We have not fully concluded how much debt we intend to issue in foreign currencies in the near term,” Höskuldur told Bloomberg. “It’s important that we take small steps to begin with.”

The likely Arion bond issue is triggered by the Icelandic government’s USD 1 billion bond issue this June which was twice over-subscribed by investors — the country’s first foray into global markets since the crash of 2008. “It was paramount that the Icelandic Republic led the way and was successful,” Höskuldur said.

Vilhjalmsson took the massive loans in the years running up to Kaupthing’s demise in order to buy shares in the bank. The Reykjavik District Court yesterday ruled that he must pay the money back.

The resolution committee of Kaupthing’s bankrupt estate started the case last December, calling on the court to reverse a decision made by the bank’s board just before it went bust to transfer ownership of seven loans granted to Vilhjalmsson. The resolution committee called on the court to cancel the bank’s decision to allow his personal debts to transfer to his private limited company.

The bankrupt bank also asked the court to make Vilhjalmsson pay some ISK 3.4 billion in interest.

DV reports that Ingvar Vilhjalmsson transferred his ISK 3 billion share in Kaupthing over to his limited company just days before Kaupthing collapsed in autumn 2008. He also transferred ownership of two luxury houses to his wife and his mother at around the same time.

Unsurprisingly the limited company formerly known as Ingvar Vilhjalmsson efh. and then renamed to K08, soon went bankrupt under the weight of its debts. Today K08 owes over ISK six billion.

The company’s debts are due to so-called bullet loans taken by Vilhjalmsson to buy shares in Kaupthing. According to the company’s 2009 report it held ISK 3 billion in Kaupthing shares — now totally worthless. With the exception of bank president Hreidar Mar Sigurdsson and chairman Sigurdur Einarsson, no Kaupthing employee borrowed more from the bank to buy its own shares.

Yesterday the Reykjavik District Court granted Kaupthing administrators’ wish that the debts be returned from K08 back to Vilhjalmsson himself. He is now legally responsible to pay the bank ISK 2,642,617,028 kronur (EUR 16,624,415 and 12 cents).

A statement from Vincent Tchenguiz says that the agreement is a positive development for all parties involved.

The statement says that funds owned by the Tchenguiz family and his investment firm, Euro Group, have all reached agreements with Kaupthing in both Britain and Iceland. Tchenguiz estimated his claim on the estate of Kaupthing at GBP 1.5 billion (ISK 276 billion) and he had begun legal proceedings against Kaupthing in British and Icelandic courts.

Earlier this year it was reported that the UK Serious Fraud Office (SFO) was investigating Kaupthing’s lending practices; and especially the ones to Vincent Tchenguiz and his brother Robert. They were both questioned by the SFO in March.

Vincent was interrogated because when the bank got into trouble and called in Robert’s debt, Vincent liquidated assets in order to prop up his brother.

According to Morgunbladid sources, the SFO investigation focused largely on the seemingly limitless access Robert Tchenguiz seemed to have to Kaupthing loan capital. When other banks started calling in Robert’s debt at the end of 2007 and in 2008, Kaupthing stepped in to fill the gap; providing their biggest customer with more funds. All loans to Robert Tchenguiz were granted through Kaupthing HQ in Iceland, and not in London, as would have been normal for British customers. Robert’s close dealings with the bank began with the London-based Kaupthing Singer & Friedlander in 2004.

A statement from Kaupthing administrators this week says that all legal cases against the bank by the Tchenguiz Family Trust have now been stopped following the agreement between all parties. Despite this, the contract is only directly related to Vincent Tchenguiz, and not his brother Robert.

Kaupthing has rejected Vincent Tchenguiz’s claim for money from the bankruptcy estate all along.

Arion Bank’s first-half profit after tax stood at ISK 10.2 billion (EUR 63.5 million) — which is ISK 2.3 billion more than the same period last year. A statement from the bank said the profit increase is greater than expected, largely because of a re-evaluation of its corporate loan portfolio.

Arion and the bankrupt estate of Kaupthing made their final transactions in the second quarter and this is therefore the first time Arion has released half-year results which are entirely independent of Kaupthing. The bank says this simplification and extra transparency is an important step for Arion, DV reported.

At the end of the first six months of the year, Arions capital adequacy ratio stood at 21.4 percent; which is significantly above the Central Bank of Iceland minimum level of 16 percent. The same is true of the bank’s liquidity position.

A statement from Arion director Hoskuldur H. Olafsson did not say whether or not the bank’s customers can expect to benefit from its good fortunes — although he did state that the bank is helping debtors by offering a wider and more flexible range of housing loan options.

Collectors are now pursuing those former employees who have refused to make a repayment deal — including some of the bank’s former top management, RUV reports.

Personal responsibility for the loans amounts to ISK 15 billion (over EUR 91 million) between 80 former Kaupthing people. The resolution committee decided to reverse the bank board’s decision shortly before it went bankrupt to write off the loans and initiated 60 legal cases to gain court support for reversing the decision.

Four cases have been judged on in district courts, all in favour of the resolution committee. Two have, however, been appealed to the Supreme Court.

Feldis Oskarsdottir, from the Kaupthing resolution committee, says that around 50 of the 80 have agreed to repayment terms, pending the Supreme Court of Iceland’s final verdict. Proceedings have now begun against the others who have not signed such agreements and have shown no interest in doing so. The proceedings include the freezing of assets, including houses, summerhouses, other real estate, shares and savings.

Oskarsdottir says that repayment terms are different for each of the former employees, based on their ability to pay. Not all of the ISK 15 billion will be recovered, she adds. She went on to confirm that most of the highest executives of Kaupthing, who took the largest loans, are not among the 50.

Reykjavik District Court yesterday backed up the Kaupthing resolution committee’s claim that the loan should be repaid, even though the bank’s board wrote it off in the weeks leading up to Kaupthing’s demise. Dozens of other former employees are in the same position, as the court ruling marks a legal precedent.

Dozens of former Kaupthing employees will probably now need to pay back loans from the bank which were used for the purchase of shares following yesterday’s court decision to overturn the board of directors’ autumn 2008 decision to write off the debts. The total amount at stake is around ISK 32 billion (EUR 195.5 million), RUV reports.

It caused a media storm in winter 2008 when it was revealed that the board had made such a decision just weeks before going bankrupt. The decision applied to around 80 staff members who had taken loans to buy Kaupthing shares.

The loans totalled ISK 32 billion and around ISK 15 billion of that was at employees’ own risk. The largest part of the 32 billion went to the bank’s most senior executives. The Kaupthing resolution committee decided last May to try and get the debt write off overturned in court.

Iceland’s FME financial regulator and the special prosecutor into the banking crash are both investigating the old banks and sources claim that plenty of evidence is coming to light on how Kaupthing and Glitnir worked together.

The banks apparently bought their own shares from the market in small batches until they reached permitted limits. Then, RUV reports, they sold those shares to each other in large batches. For example, on 6th September 2007 Kaupthing bought 1.5 billion kronur of Glitnir shares from Glitnir Bank itself. In the same minute, Glitnir bought Kaupthing shares from Kaupthing for the same amount.

Both removed their own shares from their books and were therefore free to start the game all over. In this way the banks fooled the markets and held up their share prices and investigators believe the practice was carried out at the request of the banks’ top people.

Hauksson’s team is joined by British financial crimes police and police from Luxembourg, RUV reports.

Five house searches were conducted yesterday in the Grand Duchy. As well as Havilland, the consulting firm Consolium was also raided, as well as one of Skuli Thorvaldsson’s companies.

The Luxembourg homes of former overall Kaupthing director Hreidar Mar Sigurdsson and former Kaupthing Luxembourg director, Magnus Gudmundsson, were also searched.

The active searches are now finished, with the exception of at Havilland Bank.

Robert’s brother, Vincent, was also arrested and released; and has seen his credit lines frozen as a direct result, RUV reports.

The UK’s SFO conducted searches last week in London and Reykjavik while investigating loans granted by Kaupthing. Nine people were arrested, including the Tchenguiz brothers and Sigurdur Einarsson, the former chairman of Kaupthing’s board. The SFO was assisted by Iceland’s special prosecutor into the banking crash.

Robert Tchenguiz has now gone to the media saying that his arrest was unnecessary and also illegal, because no judge had granted a search or arrest warrant in the case.

Tchenguiz said he has been trying to find out more details since his release, but has now decided to get a lawyer onto the job and may end up suing.

The brothers’ arrest has generated a lot of attention, as their business empires are large and far-reaching. The day after their arrest, creditors to Vincent at Merryl Lynch and Bank of America called in loans; demanding he pay back EUR 142.5 million right away, plus interest. Vincent managed to meet the banks’ demands with assets; but this put four of his companies into receivership. He said he is positive the two banks’ actions were a direct result of his arrest.

SFO spokesperson Kate Winstanley told reporters that the Kaupthing case is big and complicated in nature. She confirmed that the arrested parties had all been released on bail after questioning. Over 90 percent of Serious Fraud Office cases end in convictions.

The seven arrested in London yesterday were: three former Kaupthing staff members, Sigurdur Einarsson, Armann Thorvaldsson and Gudni Niels Adalsteinsson; Robert and Vincent Tchenguiz, the property tycoons and biggest Kaupthing debtors; as well as two of their staff.

The SFO conducted searches at eight houses and business premises yesterday and Frettabladid reports that officers even searched photo albums and children’s toy boxes.

Gestur Jonsson, Einarsson’s lawyer, told Visir.is he knows nothing about his client being released on bail — saying that he has not been banned from travelling and is, to his knowledge, completely free.

The investigation continues and there is not yet any indication of how long it might take.