Credit crunch hits seafood banker

Moira Baird
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Glitnir nationalized by Icelandic government

The province's seafood industry has another reason to be cautious about its finances - the U.S. credit crunch has hit one of the industry's biggest banks.

Glitnir Bank HF, which specializes in financial services to fish companies, was nationalized Monday by the Icelandic government.

The publicly traded Icelandic bank has provided financial services to some of the biggest players in the fishing industry, including Clearwater Fine Foods, Highliner Foods, the Barry Group and the now-defunct FPI Ltd.

The province's seafood industry has another reason to be cautious about its finances - the U.S. credit crunch has hit one of the industry's biggest banks.

Glitnir Bank HF, which specializes in financial services to fish companies, was nationalized Monday by the Icelandic government.

The publicly traded Icelandic bank has provided financial services to some of the biggest players in the fishing industry, including Clearwater Fine Foods, Highliner Foods, the Barry Group and the now-defunct FPI Ltd.

Iceland's central bank bought a 75 per cent stake in Glitnir Monday for more than CA$890 million.

John Sackton, an industry analyst and publisher of Seafood.com, says it's all part of the credit crunch.

"I think that people will be cautious," he said Monday. "The companies that have existing loans and financing, I think it's business as usual.

"I think the bigger effect is going to be on the bank's ability to enter into future financing deals."

Sackton says Glitnir has been involved in just about every major seafood financing deal in North America in recent years.

"They've made a specialty out of financing in the seafood industry."

He says the bank understands the ups and downs of the seafood business.

Two years ago, Glitnir opened a branch in Halifax.

"Glitnir's problems were not because they held a bunch of garbage loans. In other words, there's no problem with ... their loans to the seafood industry or their loans to other industries," said Sackton.

"It was their short-term financing that collapsed."

Glitnir covered its long-term loans to customers with short-term borrowing at low rates.

"That short-term market dried up," said Sackton.

The company was a financial advisor to Halifax-based Clearwater Fine Foods when it completed a deal to take Clearwater Seafoods Income Fund private last week. The bank also advised Clearwater when it went public on the Toronto Stock Exchange in 2002.

Glitnir was one of two banks hired by FPI Ltd. as a financial advisor during the sale of its assets to St. John's-based Ocean Choice International and Halifax-based High Liner Foods last year.

As well, Corner Brook-based Barry Group landed a $40-million loan from Glitnir in February 2006, according to documents filed with the provincial registry of deeds. At the time, Glitnir was known as Islandbanki HF. That debenture was secured with the assets of Nu Mink Inc., Barry Seafoods and the Barry Group.

On Monday, Reuters reported Iceland's central bank, Sedlabanki, would maintain control of Glitnir for at least "the next few" quarters.

"Without this intervention, Glitnir would have ceased to exist within the next few weeks. It's as simple as that," said David Oddsson, governor of Sedlabanki, at a news conference.

Glitnir said its customers, bondholders and employees will not be affected by the deal.

"Glitnir's funding has been successful this year despite very challenging market conditions," according to a Glitnir news release issued Monday.

"Nonetheless, the events unfolding in international financial markets in the past two weeks have had unforeseen consequences drastically changing the conditions of Glitnir's short-term funding.

"In light of this, the board of directors of Glitnir Bank had meetings with the Central Bank of Iceland to discuss possible solutions to the challenge that the bank was facing."

Those discussions wrapped up Sunday night.

mbaird@thetelegram.com

Organizations: Barry Group, FPI Ltd., Glitnir Bank HF Clearwater Fine Foods Clearwater Seafoods Income Fund Toronto Stock Exchange Ocean Choice International High Liner Foods Nu Mink Reuters Central Bank of Iceland

Geographic location: Clearwater, Iceland, U.S. CA North America Halifax St. John's

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