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Icelandic banks face £360mn lawsuits

Creditors of collapsed Icelandic banks have brought legal actions in the UK High Court totalling £360mn to date.

Five separate actions filed in the Queen's Bench Division of the UK's Commercial Court have been brought by commercial lenders to failed Icelandic banks Glitnir Bank, Kaupthing Bank and Landsbanki Islands.

However, it is not certain that these suits will lead to further losses for financial institutions (FI) underwriters as loan defaults are not usually included in standard insurance cover.

According to the claims forms seen by The Insurance Insider, no negligence has been alleged and standard FI policy language excludes cover for contractual obligations of the insured and claims related to lending.

The first claim, filed on 30 October, is led by the Copenhagen branch of HSH Nordbank AG along with a number of other financial institutions providing a syndicated term loan facility to Glitnir Bank arranged by Sumitomo Mitsui Banking Corporation Europe Ltd, dated 21 June 2006.

Glitnir, Iceland's third largest bank, was the first to be nationalised on 29 September last year as the country's banks were driven towards collapse amid a liquidity crisis.

The move by Iceland's government to acquire 75 percent ownership of Glitnir constituted an "Event of Default" under the loan agreement, according to the claim, such that money due "became due and immediately payable".

With the claimants yet to see any of the money repaid, the filing demands £196,902,654.87 of principal, £497.79 indemnity costs, and £1,680,914.03 interest, based on the EUR/£ exchange rate at 22 October 2008.

The second action, filed on 3 November, also names Glitnir Bank as defendant, with the claim brought by the credit division of German bank Westdeutsche Genossenschafts-Zentralbank (WGZ).

The suit also concerns the Sumitomo Mitsui arranged term loan facility agreed with the Icelandic bank.

WGZ is claiming the Euro equivalent of £15,804,030.03 principal plus interest of £154,291.67 up to 29 October 2008, calculated on a 30 October exchange rate.

A third action, also filed on 3 November, sees 13 banks file suit against Kaupthing Bank, which collapsed in October, for a total of £98,926,566.11 plus fees.

The banks, led by the London branches of Sumitomo Mitsui, Australia and New Zealand Banking Group, and The Bank of Tokyo-Mitsubishi, lent Kaupthing $160mn under a term loan facility.

The other institutions suing are First Commercial Bank's offshore banking branch, Commonwealth Bank of Australia, DBS Bank, Cathay United Bank, Taiwan Business Bank's offshore banking and Hong Kong branches, the London branch of Malayan Banking Berhad, The Export-Import Bank of the Republic of China, Hua Nan Commercial Bank's offshore banking branch, and Yuanta Commercial Bank Co.

A 20 November lawsuit filed by the UK subsidiary of New York-listed investment bank Jefferies Group Inc names Landsbanki Islands as defendant, and claims for a balance of EUR4,306,031.92, or £3,586,865.41 plus additional interest and fees it says is owed under a securities lending agreement between the parties.

The final action tracked by The Insurance Insider is a further suit filed against Glitnir Bank on 21 November by Kreditanstalt Für Wiederaufbau, seeking an early redemption amount of EUR50mn plus interest of EUR485,030.50 up to 4 November under terms of a loan.

At the 20 November exchange rate, the claim is equivalent to £42,222,597.53 principal plus interest of £409,584.95 to 4 November, and a further £94,671.30 to 19 November.

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