Austria

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...

Carinthia, the Austrian province on the hook for more than 10 billion euros ($10.7 billion) of Heta Asset Resolution AG’s debt, asked the federal government for credit and started preparations for potential insolvency, Bloomberg News reported. The southern province of 556,000 is asking for continued funding through the Austrian Treasury after a credit-rating cut by Moody’s Investors Service closed market access, the Carinthian government said in a statement on Tuesday.

Creditors of Austrian "bad bank" Heta Asset Resolution may face debt haircuts or the prospect of having the wind-down vehicle for defunct lender Hypo Alpe Adria eventually go bankrupt, the co-head of Austria's financial watchdog said, Reuters reported. The Financial Market Authority stepped in on Sunday to take control of Heta and imposed a debt repayment moratorium after the government refused to plug a looming capital hole exposed by an outside audit. The FMA now needs to work out a plan that treats all creditors equally.

Austria's parliament launched an investigation on Wednesday into defunct lender Hypo Alpe Adria, seeking to assign blame for the country's worst postwar financial scandal that has soured ties with Bavaria, Reuters reported. Making use of new powers for opposition parties to demand such probes, parliament is due to call several high-profile figures to testify on Hypo's spectacular rise, near-collapse and role in increasing state debt and the budget deficit.

Austria has agreed to sell nationalised bank Hypo Alpe Adria's Balkans network to private equity firm Advent and Europe's development bank for up to 200 million euros ($245 million), as it pushes ahead with winding down the defunct lender, Reuters reported. The sale, announced by the finance ministry and Advent after weeks of complex negotiations, is expected to close by the second quarter of 2015, pending regulatory approval. Under the deal Advent gets an 80 percent stake, while the European Bank for Reconstruction and Development (EBRD) will get 20 percent.

Austria’s nationalized lender Hypo Alpe-Adria-Bank International AG said Thursday it has split itself between a wind-down unit, called Heta Asset Resolution GmbH, and its southeastern European network of banks, The Wall Street Journal reported. The split is part of the lender’s restructuring plan approved by the European Commission. Under the plan, the Austrian government—Hypo Alpe-Adria’s current owner—must sell off all of the bank’s assets or transfer them into a wind-down unit by mid-2015. Hypo Alpe-Adria was nationalized in 2009 after overextending itself in southeastern Europe.

Shares in Austria’s Raiffeisen Bank International fell 10 per cent after the western lender with the greatest exposure to Russia and Ukraine warned that the conflict in the region would drag it to a full-year loss, the Financial Times reported. The Vienna-based lender said in a statement released late on Monday that it would increase its provisions for bad loans this year by 15 per cent to 30 per cent, mostly relating to its operations in Ukraine.

Austria's upper house of parliament passed a law on Thursday that will wipe out the claims of subordinated debt holders in Hypo Alpe Adria, Reuters reported. The law, which enters uncharted territory for debt markets because the creditors had guarantees from Hypo's home province, had been expected to pass after being approved by the lower house of parliament earlier this month. Read more.

Austria and the World Bank may end up in court over the planned wipe-out of junior creditors of nationalised Hypo Alpe-Adria-Bank International , the Austrian finance minister said, the Irish Times reported. The Austrian government was “surprised” to see that the World Bank, through its International Bank for Reconstruction and Development unit, owns €150 million of subordinated Hypo Alpe bonds, Michael Spindelegger told Austrian state radio ORF today. The Washington-based lender’s claim that it can’t be expropriated is being reviewed, he said.

Austria must add about 8 billion euros ($11 billion) liabilities of state-owned KA Finanz AG to its accounts, the European Union said, putting further pressure on the country’s debt burden, Bloomberg News reported. The EU’s statistics office Eurostat told Austria to change the classification of KA Finanz, the wind-down unit for failed Kommunalkredit Austria AG, and revise government statistics for the past five years, according to a letter posted on Eurostat’s website.