In These New Times

“Iceland’s shift to the left on Tuesday marks the end of a 17-year experiment in free market economics. This promised – for a time – to transform a volcanic island on the mid-Atlantic ridge into a booming tiger economy. Such dreams have been replaced by a vicious rise in anti-capitalist sentiment and disgust at brash and aggressive young businessmen dubbed the “Viking raiders”. Whichever direction the new leftist government may take the country, Straumur is unlikely to hang around to find out.”

FT

27th January, 2009

Straumur-Burdaras, the last Icelandic bank left standing, is seeking to move its primary listing to London or Stockholm, conditions permitting. On the face of it, Straumur’s decision to redomicile is the final insult for a country slipping fast into severe recession. But the bank, which has 85 per cent of its assets outside Iceland, has little choice but to adopt a sauve qui peut approach. De-icing or defrosting itself is its best hope of survival.

After the implosion of Kaupthing, Glitnir and Landsbanki, Icelandic banks are hardly flavour of the month in global capital markets. Straumur is the seventh largest of the 11 companies still trading on the OMX Iceland 15 but its market value has shrunk to $120m from $4bn in July 2007. Trading on about 0.1 times book, it has no analyst coverage. Reversing into a listed shell and rebranding itself, perhaps as Teathers, a broker bought from now nationalised Landsbanki, is at least a plan.

Straumur still faces a challenging liquidity crunch. Although it managed to close a bank financing of €133m in December, enabling it to repay a €200m syndicated loan, its medium-term liquidity position is daunting, with €117m falling due in the first quarter and €182m in the second. If the political crisis in Reykjavik endangers the $10bn rescue package part-financed by the International Monetary Fund and Iceland’s Nordic neighbours, attitudes to Icelandic borrowers will harden.

Iceland’s shift to the left on Tuesday marks the end of a 17-year experiment in free market economics. This promised – for a time – to transform a volcanic island on the mid-Atlantic ridge into a booming tiger economy. Such dreams have been replaced by a vicious rise in anti-capitalist sentiment and disgust at brash and aggressive young businessmen dubbed the “Viking raiders”. Whichever direction the new leftist government may take the country, Straumur is unlikely to hang around to find out.