Bondholders may sue Iceland over failed banks

A global group of bond investors have threatened the Icelandic government with legal action after being demoted below depositors in recouping funds from the country's shattered banking system.

Bondholders in Landsbanki, Kaupthing and Glitnir were relegated behind depositors in the queue of creditors as part of emergency legislation during the Icelandic financial meltdown in 2008. In a move which could delay efforts to recoup billions of pounds of UK taxpayer funds held in Iceland, the bondholders argue the government's move was unlawful, the Guardian reports. The paper says any litigation could frustrate the Treasury's efforts to persuade Iceland to reimburse the compensation it paid to British savers after the collapse of Landsbanki's Icesave internet brand. A group of ...