Iceland Won't Talk With Banks' Hedge Fund Creditors

Jan 23 2014 | 11:32am ET

Iceland's government is disclaiming any responsibility for striking a deal with creditors of banks that went under during the financial crisis.

The country's government will not meet with the hedge funds and others holding the banks' debt, Prime Minister Sigmundur Gunnlaugsson. He said that the government's only role is to determine whether the deal will allow the country to lift currency controls it imposed in 2008.

"It seems they've been waiting to see whether the government would somehow step into the process," Gunnlaugsson said. "But this is not a project for the government. The only role of the government here is to assess whether they come up with a solution which allows for the lifting of currency controls."

The prime minister did urge the creditors, among them Davidson Kempner Capital Management, Hayman Capital Management and Taconic Capital Advisors, to consider that in their negotiations.

"These investors—most of them came in after the economic collapse—then they could cash in other investment and in many cases multiply their investment," he said. If the deal allowed "the government to lift the controls," the investors "could then cash in, so to speak."

Iceland's central bank said it has held several meetings with the creditors. But Gunnlaugsson made clear the talks would go no higher.

The creditors of the five banks "are just private entities trying to reach an agreement regarding a private debt," he said. "So the state—the government—has nothing to do with that. We're not in talks with those creditors and we won't be. Never were going to be."

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