Comments on: Glitnir’s Kiddiegate Affair

By: Andrew

Andrew — Mon, 09 Nov 2009 08:23:18 +0000

Would I be right in thinking that every financial institution in Iceland has now gone bust!?

By: Joerg

Joerg — Sun, 08 Nov 2009 11:12:44 +0000

I was referring to the 70-80% devaluation mentioned, which for me sounds too much for a reduction of the value of shares. Of course, if there is no tranparent market for those savings banks shares and the percentage is based on inflated prices, then everything might be possible.

And even though I think, those parents should have acted more prudent, the most greedy party in this plot is definitely located on the side of the Baugur related investors as they managed to strip the savings banks off their assets.

By: Bromley86

Bromley86 — Sat, 07 Nov 2009 22:44:49 +0000

>I think Joerg has excactly right, the dilution didn’t mean that the prior owners lost any of their value

Yes it did.

Have a look at the rights issue page on Wiki:
http://en.wikipedia.org/wiki/Rights_issue

In their simple example, Mr A had $40k of shares. If he didn’t participate in the rights issue, he’d only have $30k, despite still having all of his original 100 shares.

joerg misunderstood idunn’s point. Their savings were in Byr – the savings were invested in shares, rather than deposited in a Byr account.

The parents were offered an easy option that meant that they didn’t have to take a financial hit. Better still, they stood to gain lots of money. So they were greedy and frankly they should have had to pay if only because all loans/deposits to/by minors should be under the ultimate control/responsibility of an adult. But that’s not the case in Iceland, so they’re off the hook for the kid’s loans.

By: Great Eastern

Great Eastern — Sat, 07 Nov 2009 17:11:16 +0000

What is timeline of those events? If year 2006 then first alarm bells were already sounded that year. Banks were struggling to get more money for their [write in anything you want.]
Just another schema to lure depositors.
Ironically, it is very probable bankers believed turbulent times of year 2006 were a temporary issue and that they were doing a good thing.
On the bright side we managed to live through a very exciting years. It is not a war but for our lazy gadget generation it is something.
And yes – I do want to point that our grandfathers lived through times uncomparably harsher than ours. Still we generate so mush flood on the internet that it is starting to look pathetic.

By: cactus zonie

cactus zonie — Sat, 07 Nov 2009 06:17:00 +0000

Keep drinking the COOL AID , Gauti

By: Berglind

Berglind — Fri, 06 Nov 2009 21:19:58 +0000

I think Joerg has excactly right, the dilution didn’t mean that the prior owners lost any of their value, only their share got to be a lower percentage. Therefore I think, Alda, you will have to re-think the whole concept. The parents were controlled by nothing but greed – love of money, solely.

By: Silvia Planchett

Silvia Planchett — Fri, 06 Nov 2009 20:13:18 +0000

Try as I might, it is very difficult to understand how kiddies and multi-million kronur loans involving same can be mentioned in the same paragraph unless one is speaking of nefarious activities which of course would explain it all! Even with the bleach added, it still comes out dingy!

By: Joerg

Joerg — Fri, 06 Nov 2009 10:31:20 +0000

“…people had their savings with Byr…Then through skullduggery the Baugur Group gains control of Byr, and their savings”

If I am not mistaken, this is not about savings but about shares in savings banks. And the dilution mentioned means a decrease in ownerhip percentage rather than a reduction of the value of existing investments in those shares.

By: idunn

idunn — Thu, 05 Nov 2009 19:25:15 +0000

If I understand this correctly (perhaps), people had their savings with Byr, or possibly one of the other two savings banks that merged to form it. Then through skullduggery the Baugur Group gains control of Byr, and their savings.

So then Baugur Group wants to expand and makes these people an offer they cannot refuse: either put more money with us by buying more shares, or we steal about 75% of your shareholdings by devaluing your stock. If you don’t have the money, no problem, our bank, Glitner, will loan it to you. BUT you must secure the loan with the collateral of your shares. In other words, put all your investment on our roulette wheel and let us spin it.

Children unknowingly end up in this because it is customary to extend such gifts, even if the gifts somewhat dubious as in this instance.

Then Baugur Group runs everything into the ground. Their bank, Glitner, discovers it cannot enforce judgements against children. The adults who participated are supposedly, technically, still liable to Glitner for loans extended. Maybe. But one thing is for sure, no one having invested with Baugur Group will see their money back.

Shareholders aside, I wonder whatever happened to the original savings people kept with Byr. Were they caught up in this and gone as well, or perhaps at last protected, as those having put their money there always intended?

This is what caught my attention at the outset: “the value that the older generation [of Iceland] placed on the sense of community and common good.” Is such sentiment now but historical footnote, or perhaps born again?

By: Bromley86

Bromley86 — Thu, 05 Nov 2009 14:37:47 +0000

>Why could the parents not take the loans in their own names?

The only good news is that I suspect that they did:

So the people who already owned shares in the bank were sent a letter in which these plans were outlined, and they were invited to increase their share. And if they didn’t have the money, no problem, Glitnir bank would take care of it.

So it’s probable that some/all of the the parents also took loans to maintain their share. And those loans weren’t illegal. And, whilst the collateral is valueless, they will be collected from the people’s other assets. Unless someone intervenes and writes them all off, but that seems unlikely to happen now that it has hit the press.