Central Government buys the National Local Government Pension Fund (KLP)’s ownership stake in Kommunalbanken AS

The Central Government will purchase KLP’s ownership stake in Kommunalbanken and become the institution’s 100 per cent owner. Simultaneously, KLP has entered into an agreement with Eksportfinans ASA with regard to the purchase of Kommunekreditt Norge AS.

On the 7 May 2009, The Ministry for Local Government and Regional Development has entered into an agreement with KLP with regard to the purchase of KLP’s ownership stake in Kommunalbanken AS. The purchase price is set at NOK 528.3 million. There can be some minor adjustment in the price. The purchase is subject to approval by Parliament.

- I am very glad that we now have two clearly focused and competing entities in the market for local government lending. This is a good solution and will mean better financing terms for the municipalities, said The Minister for Local Government and Regional Development Magnhild Meltveit Kleppa.

- I am very happy with the solution that Eksportfinans has found with regard to Kommunekreditt. The Government promised last autumn to give its support in finding a solution that would ensure continued cost effective financing for the municipalities. We now have that in place, said Minister of Trade and Industry Sylvia Brustad.

The purchase price for KLP’s ownership share is based on the following:

• Book value as of 31 March 2009
• A goodwill consideration of NOK 6,609,808

In addition to the fixed price, there will be an interest payment equivalent to 3 month Nibor for the period from 31 March 2009 until the purchase is formally approved.

Kommunalbanken’s mandate is to lend to the local government sector. At the end of 2008, the institution had a market share of 41 per cent. Kommunalbanken’s lending volume to the local government sector at the end of 2008 was NOK 118 billion. The institution’s net annual result after tax in 2008 was NOK 390 million.

The background for the Central Government’s purchase of KLP’s ownership stake in Kommunalbanken AS is that KLP has entered into an agreement with Eksportfinans ASA with regard to the purchase of Kommunekreditt Norge AS. Until now, Kommunekreditt has been a wholly owned subsidiary of Eksportfinans, which itself is partially owned by the Central Government.

KLP’s purchase of Kommunekreditt Norge AS means that KLP, as the owner of Kommunekreditt, will become an important competitor for Kommunalbanken AS. For the past six months, Kommunekreditt Norge AS has not been able to offer new loans to the counties and municipalities. Kommunekreditt’s situation has limited the competition for and access to loans for the Norwegian municipalities.

KLP’s purchase of Kommunekreditt from Eksportfinans ASA will lay the foundations for Kommunekreditt to regain its position as an important provider of loans to the Norwegian municipalties.

- With Kommunalbanken AS 100 per cent owned by the Central Government and Kommunekreditt Norge AS 100 per cent owned by KLP, the municipalities and counties can now engage with two institutions that have a primary objective of lending to Norwegian municipalities and counties, said Minister Kleppa.

The Central Government has engaged Arctic Securities ASA as financial adviser and Wiersholm as legal adviser in connection with the negotiations.

 

Secretary General Eivind Dale, Ministry of Local Government and Regional Development, and director Sverre Thornes, KLP, are signing the agreement. Photo: Ministry of Local Government and Regional Development/ELD

The Ministry for Local Government and Regional Development press department: 22 24 25 00