Austria

An attempt by the Austrian province of Carinthia to avert the threat of insolvency has failed as too few creditors accepted its offer to buy back a failed bank's bonds at a discount, a person with knowledge of the total said on Friday. Carinthia guaranteed local bank Hypo Alpe Adria's bonds before the lender collapsed and the so-called bad bank Heta Asset Resolution was formed to wind it down. The province wants to repurchase the bonds at a discount to their face value of 10.8 billion euros ($12.1 billion) to avoid having to honour those guarantees, which it says it cannot afford.

Creditors of Heta Asset Resolution AG who say they control more than 5 billion euros ($5.5 billion) of the bad bank’s debt won’t sell at a discount, highlighting the battle Austria faces as it tries to share losses with creditors and prevent a provincial insolvency, Bloomberg News reported. The Austrian state of Carinthia, which has guaranteed 11 billion euros of Heta’s debt and is offering to buy it up for about 3 billion euros less than the face value, is able to fully pay up, the creditors said in a statement on Thursday.

The Austrian supermarket chain Zielpunkt is formally beginning insolvency proceedings with the Vienna court of commerce, The Local reported. Nearly 3,000 employees are expected to lose their jobs before Christmas. Zielpunkt's owner, Upper Austrian businessman Georg Pfeiffer, has been accused of deliberately letting the business fail after gaining control of dozens of Zielpunkt properties and of timing the insolvency filing for the end of November so that he could avoid paying Christmas bonuses to the chain's employees (saving him around €18 million).

Heta Asset Resolution AG, the Austrian “bad bank” that unveiled a 7 billion-euro ($8 billion) capital hole Wednesday, said an insolvency may ultimately be the only way to shut down the company, Bloomberg News reported. Heta, the remnant of the failed, nationalized Hypo Alpe-Adria-Bank International AG, warned on Thursday that the insolvency remains on the table even as a debt moratorium imposed by regulators staved it off for now.

The media in Austria's larger northern neighbor once envied the country's economic success, dubbing it ''the better Germany.'' Things are different now, Bloomberg News reported. Since that title was applied in a Stern magazine article in 2005, annual GDP growth in Austria has slid downward, to 0.1 percent last year from well above 2 percent then. Having outpaced the euro area's biggest economy for most of the past 15 years, the Alpine republic is now lagging behind Germany, also its most important export market.

Klagenfurt am Wörthersee, an Alpine lake city almost 350km from Vienna, was once the idyllic backdrop to one of the most calamitous banking collapses in Europe. Now, it is closing in on a new claim to fame: as the venue for a trial run for as-yet-untested rules within the EU on who foots the bill when banks go bust, the Financial Times reported.

The home province of defunct lender Hypo Alpe Adria, Carinthia, is asking Vienna for financial support, saying it will run out of money by the beginning of June without external help, Reuters reported. Carinthia provided debt guarantees for years to fuel Hypo's rapid expansion before the practice was stopped in 2007, but the last ones do not expire until around 2017. With an annual budget of 2.2 billion euros ($2.36 billion), Carinthian officials have said the province cannot honour nearly 11 billion euros of backing for Hypo debt that creditors facing a "haircut" could demand.

The Hypo Alpe Adria saga ripples on. It claimed its first victim last week, the tiny mortgage lender Duesseldorfer Hypothekenbank, Forbes reported. A number of German banks and insurance companies have admitted that they stand to lose significant amounts on Heta bonds: most recently, the German insurer Talanx said that losses on Heta holdings estimated to be “in the high tens of millions” would cost it “less than 10m EUR”, and the Landesbank Helaba confirmed exposure of 85m EUR, writedown of which would cost an estimated 25m EUR. Both of these estimates look too low to me.

Austria's application of new European Union rules in its handling of failed bank Hypo Alpe Adria was justified, the bloc's financial services chief Jonathan Hill said on Tuesday. Hypo Alpe Adria, now defunct, was nationalised in 2009 and has already cost Austrian taxpayers about 5.5 billion euros ($6 billion), with the bailout triggering new banking legislation and a complex web of litigation.

Austria's Carinthia province is studying ways to avoid going insolvent under the weight of debt guarantees for defunct lender Hypo Alpe Adria several times its annual budget, the region's government said on Tuesday, Reuters reported. Carinthia, which is in southern Austria, has an annual budget of 2.2 billion euros ($2.4 billion) and would struggle to honour nearly 11 billion euros of backing for Hypo debt that creditors could demand. "Now all consequences...