Austria

Austria's draft law on restructuring heavily indebted Hypo-Alpe-Adria Bank International AG could lead to higher financing costs for the country's banks and damage investors' trust if enacted, the president of the Austrian Bankers' Association said Tuesday, The Wall Street Journal reported.

A dangerous precedent could be set by Austria if its government goes ahead with a potential bail-in of Hypo Alpe-Adria's guaranteed subordinated debt, market participants said last week, Reuters reported. This small Austrian lender could be another test case for European authorities. Bail-in of bank subordinated debt has become commonplace over the last two years, but no country has retroactively removed a guarantee before. "The cost benefit of going down that route would be poor," said one analyst.

Austria's Verbund has offered to sell its stake in troubled Italian energy group Sorgenia as part of a debt restructuring plan with creditor banks, a spokeswoman for the state-owned utility said on Monday. "It's about sharing the burden... We are waiting for offers," the spokeswoman told Reuters. Loss-making Sorgenia, 52 percent controlled by Italian holding company CIR, has run up 1.8 billion euros ($2.5 billion) of debt - 600 million euros of which must be cleared to keep it afloat in the short term.

In a vast warehouse in the small town of Trumau near Vienna, some of the remnants of Austria's biggest post-war bankruptcy are laid out in thousands of neatly arranged lots. A handful of potential buyers pick over the piles of drills, saws, cables, buckets and pumps that are being auctioned off to make a few million euros for the creditors of Alpine Bau, a former unit of Spanish construction group FCC, Reuters reported.

The Austria government wants to ensure taxpayers do not end up footing the entire bill for winding down state lender Hypo Alpe Adria and could use special legislation to go after some creditors, government ministers said on Sunday. Austria, which nationalised Hypo in 2009 to avoid a failure that would have sent shockwaves across the region, finally ruled out on Friday letting it go bust. Instead it will wind it down via an expensive "bad bank".

Austria's finance minister Friday said debt-ridden bank Hypo-Alpe-Adria Bank AG will be wound down and not allowed to become insolvent, ending months of speculation on how to close the financial black hole, The Wall Street Journal reported. After years of repeated bailouts, a separate entity will be set up to wind the bank down, Michael Spindelegger said, with some creditors sharing the burden. "There were many reasons to seriously consider an insolvency, but in the end the risks weren't predictable," Mr. Spindelegger said.

Austria should set up a so-called bad bank to manage the assets of Hypo Alpe-Adria-Bank International AG rather than pursue a riskier strategy of shuttering the nationalized lender, Austrian Central Bank Governor Ewald Nowotny said, Bloomberg News reported. The bad bank would manage about 17.8 billion euros ($24.7 billion) of Hypo Alpe’s assets, Nowotny said today on Austrian state broadcaster ORF. A task force formed to consider the bank’s future concluded that the costs of letting it go insolvent exceed the benefits, he said.

The heads of Austria's two ruling parties on Tuesday backed the idea of letting a commission of experts look into the 2009 emergency nationalisation of lender Hypo Alpe Adria, a step that could head off a parliamentary investigation of the deal, Reuters reported. The takeover of Hypo from Bavarian state bank BayernLB and other owners staved off a collapse that would have sent shock waves across the region a year after Wall Street bank Lehman Brothers went down. But Hypo's mounting costs have made it a huge headache for the ruling Social Democrats and conservative People's Party.

Creditors of Hypo Alpe Adria should contribute to the costs of winding down the nationalised Austrian lender, the finance ministry said on Thursday, listing insolvency or voluntary debt haircuts as possible options, Reuters reported. The comments widen a split between the government and bank supervisors over how to handle Hypo, whose chronic capital needs have required 4.8 billion euros ($6.6 billion) in taxpayer support since 2008.

Austria has not ruled out letting nationalised lender Hypo Alpe Adria go bust even though this option poses many risks, Finance Minister Michael Spindelegger told parliament on Monday, Reuters reported. He was speaking after ratings agency Moody's fired a shot across the government's bows late on Friday by downgrading the bank and its home province of Carinthia. "I do not exclude any option but I warn against shooting from the hip," Spindelegger told a debate about the government's handling of the bank it had to nationalise in 2009.