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Icelandair Group Hf Icelandair Group hf. Prospectus October 2010 I. Summary NOTICE TO INVESTORS This Summary should be read as an introduction to the Prospectus, consisting of this Summary, a Registration Document and a Securities Note all dated 28 October 2010. The Prospectus can be obtained in electronic format on www.icelandairgroup.is. A hard copy can be obtained from Icelandair Group hf. headquarters, Reykjavík Airport, 101 Reykjavík, Iceland. This Summary, Registration Document and Securities Note can be obtained for the next 12 months. Any investment decision relating to shares in Icelandair Group hf. should be based on a consideration of the Prospectus as a whole by the investor. Where a claim relating to information contained in the Prospectus is brought before a court, a plaintiff investor may, in accordance with the relevant national legislation of the Contracting Parties to the European Economic Area Agreement, have to bear the costs of translating the Prospectus before legal proceedings are initiated. Civil liability attaches to those persons who have tabled the Summary, including any translation thereof, and applied for its notification, but only if this Summary is misleading, inaccurate or inconsistent when read together with other parts of the Prospectus. No person is authorised to give information or to make any representation in connection with the New Shares other than as contained in the Prospectus. If any such information is given or made, it must not be relied upon as having been authorised by the Company or any of the Company’s respective affiliates or advisers. Neither the delivery of the Prospectus nor any sale made hereunder shall under any circumstances imply that there has been no change in the Company’s affairs or that the information set forth in the Prospectus is correct as of any date subsequent to the date hereof. REFERENCES References to “Icelandair Group”, “the Issuer”, “we”, “us”, “the Group” and “the Company” in this Summary shall be construed as referring to Icelandair Group hf., Icelandic ID No. 631205-1780, unless otherwise clear from the context. References to “SPW ehf.” in this Summary shall be construed as referring to a special purpose vehicle, incorporated under the laws of Iceland, ID No. 530910-0590 whose registered office is at Sóltún 26, 105 Reykjavík, unless otherwise clear from the context. SPW ehf. common stock is divided between two shareholders: Íslandsbanki with 71.1% and Glitnir Bank which holds the remaining 28.9% share in the company. References to “the New Shares” in this Summary shall be construed as referring to 2,941,000,000 new shares in Icelandair Group hf., admitted to trading on the Main Market of NASDAQ OMX Iceland and subscribed to by professional investors, unless otherwise clear from the context. SUMMARY OF THE SHARE OFFERING This Summary, which forms part of the Prospectus, concerns an Icelandair Group share offering to professional investors of 2,941,000,000 New Shares and the admission to trading on NASDAQ OMX Iceland Main Market. The Issuer is Icelandair Group hf. ID No. 631205-1780, registered office Reykjavík Airport, 101 Reykjavík Iceland, telephone number: +354 505 0300. The Listing Advisor is Íslandsbanki hf., ID No. 491008-0160, registered office Kirkjusandur 155, Reykjavík, Iceland, telephone number: +354 440 4000. Icelandair Group hf. | Summary | 1 Information about the Issue The New Shares are all of the same class and bear the same rights and are identical to the existing shares in Icelandair Group. The issue of New Shares will be allocated to professional investors and also in the form of debt-to-equity conversions to Íslandsbanki and Glitnir Bank. Professional investors have subscribed to New Shares in the total of 2,221,000,000 in Icelandair Group at the price of ISK 2.5 per share. Íslandsbanki and Glitnir Bank will convert debt in the amount of ISK 3,600,000,000 into New Shares at the price of ISK 5 per share. Admission to Trading An application has been made for the New Shares to be admitted to trading on the regulated market of NASDAQ OMX Iceland, which is an EU regulated market within the meaning of Directive 2004/39/EC on Markets in Financial Instruments (“MiFID”), which has been implemented through the Securities Transaction Act No. 108/2007. NASDAQ OMX Iceland is authorised pursuant to the Act on Stock Exchanges No. 110/2007 to operate a regulated market under the supervision of the Icelandic Financial Supervisory Authority (FME). The FME is a governmental agency responsible for, among other things, supervising Icelandic securities market laws. Furthermore, pursuant to the Act on Stock Exchanges No. 110/2007, NASDAQ OMX Iceland is required to have rules of its own, governing the trading on NASDAQ OMX Iceland. The New Shares will be delivered electronically through the depository agent, the Icelandic Security Depository, Laugavegur 182, Reykjavík, Iceland. The New Shares will be issued electronically at the ISD no later than 3 November 2010, and they will be admitted to trading no later than on 5 November 2010. The Company’s share capital consists of one class of shares, each share having a nominal value of ISK 1.0. The ISIN number of the shares is IS0000013464. The shares’ ticker symbol in the trading system of the NASDAQ OMX Iceland hf. is ICEAIR. New Issues At a shareholders’ meeting held on the 6 August 2009, the shareholders of the Issuer granted the Board of Directors the authority to increase the Issuer’s share capital by up to 4,000,000,000 nominal value for the purpose of strengthening the Company’s financial position. On 9 September 2010, the Board of Directors used the authorisation from the shareholders’ meeting on 6 August and approved the issue of New Shares in the amount of 2,941,000,000 in accordance with Article 15 of the Articles of Association. The total share capital of the Company will be 3,941,000,000 after the issue of the New Shares. No further authorisations or approvals are needed to issue the New Shares Reasons for the Issue and Use of Proceeds The Group undertook major cost-cutting measures in the first half of 2008. The cost-cutting measures taken in 2008 are among the main reasons for the Group’s ability to shoulder the downturn in 2008 and early 2009. The balance sheet was not self-sustaining, in particular due to the high level of indebtedness, and it was a major problem for the Group even before the collapse of the banking system in Iceland. It had been evident for some time that the balance sheet needed to be restructured. The collapse of the banking system in Iceland late in 2008 along with the worldwide recession affected the Group’s operational landscape, especially as domestic demand dropped significantly. Strain on cash flows followed due to termination of the Group’s banking services coupled with severe outflows of cash to meet an ever-growing demand for cash collateral by international financial institutions to replace bank guarantees. Icelandair Group hf. | Summary | 2 To meet these changes, the Board of Directors of the Group announced its plans to adapt to this new environment. A step in this process was the financial restructuring and binding agreements were signed on 12 August 2010. The Group addressed its refinancing and liquidity needs by entering into a standstill agreement with Íslandsbanki and Glitnir Bank. Further steps to mitigate the refinancing needs are taken with the sale of assets, by the conversion of debt into equity, and by changing the term structure of loans. The proceeds from the equity share issue will be used to increase cash on hand in the Company. Professional investors have now subscribed for New Shares for a total of ISK 5,552,500,000 at market value in new share capital, which corresponds to 2,221,000,000 New Shares in Icelandair Group. Íslandsbanki and Glitnir Bank have convert debt in the amount of ISK 3,600,000,000 into New Shares at the price of ISK 5 per share, which corresponds to 720,000,0000 New Shares in Icelandair Group. Private Tender The New Shares have been subscribed to by professional investors and in the form of debt-to-equity conversion by Íslandsbanki and Glitnir Bank. The tables below show the largest new shareholders. Item 1. New shareholders that have subscribed for 2,221 million New Shares announced on 12 August 2010 New Shareholders ID Number Nominal Value Price Market Value Holding (ISK) (ISK) (% of share capital) The Enterprise Investment Fund slhf.. 651109-0510 1,200,000,000 2.5 3,000,000,000 30.4% The Pension Fund of Commerce........ 430269-4459 400,000,000 2.5 1,000,000,000 10.1% Lífeyrissjódir Bankastræti 7............... 711297-3919 200,000,000 2.5 500,000,000 5.1% Virding hf......................................... 561299-3909 137,000,000 2.5 342,500,000 3.5% Stefnir ÍS-15.................................... 470206-8450 85,000,000 2.5 212,500,000 2.2% Íslensk verdbréf hf............................ 610587-1519 54,000,000 2.5 135,000,000 1.4% Stefnir ÍS-5...................................... 430407-9610 45,000,000 2.5 112,500,000 1.1% Other new shareholders.................... 600390-9619 100,000,000 2.5 250,000,000 2.5% Total.............................................. 2,221,000,000 5,552,500,000 56.3% Dilution On the date of this Summary, the total number of shares in Icelandair Group is ISK 1,000,000,000 in nominal value, divided into an equal number of shares, each with a nominal value of ISK 1.0. The issue of the New Shares increases Icelandair Group’s share capital by 2,941,000,000 shares.
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