Participation in HF Fund’s switch auctions
On Friday, 8 December, HF Fund concluded switch auctions in which the holders of HFF34 and HFF44 could exchange the bonds for government bonds owned by HF Fund. Participation in the auctions was satisfactory and shares amounting to a total of ISK 38 bn were exchanged. The excess demand for HFF34 turned out to be ISK 8 bn with bids amounting to ISK 28 bn whereas the Fund’s holdings in RIKS30 was ISK 20 bn. All offers for HFF44 were accepted, or ISK 18 bn for RIKS33.
The auctions reduced the principal amount of HF Fund’s debt by ISK 38 bn, corresponding to approximately 5.4% of total liabilities, which today amount to about ISK 670 bn with accrued interest and inflation. The reduction in debt also reduces the Fund’s negative interest margin and thereby future losses.
Participation in the auctions was distributed amongst all categories of bond owners. In amounts, the largest volume of trading was by UCITS management companies, or 55% of the auctions, amounting to approximately ISK 21 bn to market value. Thereby the funds reduced their share of HF Fund’s debt significantly and they currently hold just about 1% of total liabilities. This was followed by pension funds with 12% of the offering, amounting to about ISK 4.6 bn. at market value, but despite this, pension funds’ share of total liabilities of the HF Fund go from just under 91% to more than 95%.
In February of next year, the last instalment of the HFF24 series is scheduled. When this is completed, pension funds will own just over 96% of the HF Fund’s total liabilities, or approximately ISK 638 bn. Other categories of owners will own just under 4% or ISK 25 bn. Of these, insurance companies and guarantee funds are the largest with more than ISK 12 bn, followed by UCITS management companies with less than ISK 5 bn.
As previously mentioned, further auctions are being considered for the first weeks of next year and interested parties are encouraged to contact the depositary of their HFF for further guidance regarding participation in such auctions.
