Meltdown in Iceland

By

Steven Hedlund

Published on
October 9, 2008

As bad as the financial meltdown is in the United States, the situation in Iceland is far worse - the country is teetering on "national bankruptcy," Prime Minister Geir Haarde warned this week. The global credit crisis has crippled Iceland's banking sector, which dwarfs the rest of its economy with assets at nine times the annual gross domestic product of $19 billion.

Iceland's banks are highly leveraged internationally and therefore particularly vulnerable to the global credit crisis, which has many seafood executives on edge. Over the past several days the government has seized control of the nation's three largest banks - Kaupthing, Landsbanki and Glitnir, all major lenders to the global seafood industry - to avert an all-out collapse of the overgrown banking sector.

The uncertainty regarding Glitnir forced Canadian seafood company Clearwater Seafoods on Wednesday to delay its plans to go private, which was slated to close this month; the bank is committed to finance about 10 percent of the deal. The Icelandic government on Wednesday put Glitnir in receivership to temporarily protect it from its debt obligations, abandoning its plans to nationalize the bank.

Glitnir has helped finance numerous seafood company transactions in the past several months, including American Seafoods' acquisition of Yardarm Knot and Icicle Seafoods' sale to Fox Paine.

Michael Richard, director of Glitnir's U.S. subsidiary, Glitnir Capital Corp. in New York, says the day-to-day operations of the bank's North American seafood division have not changed.

"Our team remains focused on its strategy to strengthen and expand its presence in the seafood and geothermal sectors," he says. "As a matter of fact, our corporate finance/M&A [mergers and acquisitions] advisory team sees attractive opportunities despite the challenging environment, and we are actively engaged in supporting a number of transactions.

"We believe [the government's investment in Glitnir] removes any uncertainty over Glitnir's stability and sets the foundation for success going forward," adds Richard.

Let's hope Richard is right, and that the worst of Iceland's financial meltdown is over. The well-being of the global seafood industry depends on it.

Best regards,
Steven Hedlund
Associate Editor
SeaFood Business

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