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New Hedge Fund Influx to Iceland, Following Capital Controls Lift

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Stockholm (HedgeNordic) A throng of hedge funds has moved back into  Iceland, acquiring a $450 million (48.8 billion Icelandic kronur) stake  in Arion Bank, following the lifting of capital controls in that country  a week ago.
Arion’s largest shareholder sold roughly 10% stakes to Attestor Capital  and Taconic Capital Advisors UK. Other entities affiliated with Goldman  Sachs and Och-Ziff Capital Management Group also bought lesser stakes.  Arion was created from Kaupthing Bank’s domestic assets after the 2008
financial crisis.
“This is a milestone in the settlement of the failed banks,” Iceland’s  Prime Minister Bjarni Bendediktsson told Bloomberg on Monday. “It shows  that Iceland’s economy enjoys trust when we have foreign investors  putting money into the financial sector,” though he added he had “no  premise to evaluate” what plans the funds have for their stakes in the  banks.
Iceland dismantled most of the remaining capital controls that had been  implemented following Kaupthing’s collapse in 2008 under a crushing $85  billion debt. The purchase means the Icelandic Treasury will be repaid  some of the 84 billion-krona bond, Prime Minister Benediktsson said,  making it the “largest equity portfolio investment by foreign parties in  Icelandic history,” according to Paul Copely, CEO at Kaupthing.
The capital controls had lasted nearly a decade despite being an  emergency measure, with financial authorities restructuring debts and  attempting to diversify the economy since its previous drastic turn to international finance, with its known consequences. Because of the need  to freeze assets following the crash, the government has long been  locked in a dispute with international investors, something it hopes to  resolve now.

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Glenn Leaper, PhD
Glenn Leaper, PhD
Glenn W. Leaper, Associate Editor and Political Risk Analyst with Nordic Business Media AB, completed his Ph.D. in Politics and Critical Theory from Royal Holloway, University of London in 2015. He is involved with a number of initiatives, including political research, communications consulting (speechwriting), journalism and writing his post-doctoral book. Glenn has an international background spanning the UK, France, Austria, Spain, Belgium and his native Denmark. He holds an MA in English and a BA in International Relations.

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