Austria on Track to Bail in Heta Creditors After Aid Cut Off (1)
2015-03-01 19:38:17.427 GMT
(Updates with affected liabilities, consequences for unit
sale from seventh paragraph.)
By Boris Groendahl
(Bloomberg) -- Austria won’t give fresh capital to Heta
Asset Resolution AG, making the “bad bank” of failed Hypo
Alpe-Adria-Bank International AG the first case under new
European Union rules imposing losses on bank bondholders.
Austria cut off support for Heta, which has already cost
Austrian taxpayers about 5.5 billion euros ($6.2 billion) in
aid, after Heta notified the government it may need as much as
7.6 billion euros on top of that, the Finance Ministry said in a
statement on Sunday. The Finanzmarktaufsicht regulator put Heta
into resolution and ordered an immediate debt moratorium.
“The decision was triggered by information from Heta’s
management about the first results of an asset review,” the
ministry said. “Because of that dramatic change of the asset
evaluation, the ministry together with the entire government
decided not to invest any more tax money into Heta.”
Heta’s predecessor Hypo Alpe was nationalized in 2009 after
it was close to collapse because of bad loans in the western
Balkans and shareholders led by Bayerische Landesbank walked
away from the bank. Its rescue and wind-down has been
complicated by a string of court cases and by the fact that a
large part of its debt is guaranteed by the Carinthia province,
a former owner of the bank.
No Repayment
The FMA is taking over the wind-down of Heta, which kept
around 18 billion of Hypo’s assets when it was set up last year.
While it works out a resolution plan it won’t repay Heta’s
liabilities under an Austrian law that came into force Jan. 1 to
implement the European Union’s Bank Recovery and Resolution
Directive, the authority said in a statement.
The immediate debt moratorium means 950 million euros of
bonds due March 6 and March 20 won’t be repaid. It affects 9.8
billion euros in outstanding bonds, supplementary capital and
Schuldschein loans, 1.24 billion euros debt to Pfandbriefbank
(Oesterreich) AG, a bank that handles bond issues for Austrian
provinvial banks, as well as loans from BayernLB, according to
the FMA’s decree published on its website.
Putting Heta into resolution means there is no insolvency
procedure, the FMA said. An insolvency would have endangered the
sale of Hypo Group Alpe Adria AG, the “good” part of the
business that’s operating banks in the former Yugoslavia, which
was signed last year but isn’t completed yet, it said. An
insolvency would have made the sale of Heta’s remaining assets
more difficult and led to higher losses for creditors, it said.
Government Guarantee
Avoiding Heta’s insolvency also means that the Carinthia
province’s guarantees for Heta’s bonds aren’t triggered under
Austrian law, the finance ministry said. The ministry reiterated
that it will honor a federal government guarantee for a 1
billion-euro subordinated Heta bond, should it become due.
The FMA’s intervention caps a dramatic development over the
weekend that is described in the authority’s decree.
Heta notified the FMA Friday night at 9:20 p.m. Vienna time
that an asset review that started last year led to write-down
needs of as much as 8.7 billion euros, resulting in negative
equity of up to 7.6 billion euros. It wouldn’t have enough funds
to repay liabilities from next year, Heta told the FMA,
according to the document.
Shortly after that notification Friday night, Heta and the
FMA notified the Austrian government and asked whether it would
recapitalize Heta to make sure the liabilities are repaid. It
answered at 12:24 p.m. today that it wasn’t going to, according
to the document.
For Related News and Information:
Austria Adjusted Law to Allow Bail-In of Heta’s Senior Bonds
Heta Senior Bonds Due Next Month Drop as Austria Weighs Bail-In
Austria Handled Hypo Alpe Rescue Like Amateurs, Commission Says
Top Financial Regulation Stories: TOP FREG<GO>
Top Financial Stories: FTOP<GO>
Top Stories: TOP<GO>
To contact the reporter on this story:
Boris Groendahl in Vienna at +43-1-513-2660-12 or
bgroendahl@bloomberg.net
To contact the editors responsible for this story:
Patrick Henry at +32-2-237-4328 or
phenry8@bloomberg.net
Robin Stringer
2015-03-01 19:38:17.427 GMT
(Updates with affected liabilities, consequences for unit
sale from seventh paragraph.)
By Boris Groendahl
(Bloomberg) -- Austria won’t give fresh capital to Heta
Asset Resolution AG, making the “bad bank” of failed Hypo
Alpe-Adria-Bank International AG the first case under new
European Union rules imposing losses on bank bondholders.
Austria cut off support for Heta, which has already cost
Austrian taxpayers about 5.5 billion euros ($6.2 billion) in
aid, after Heta notified the government it may need as much as
7.6 billion euros on top of that, the Finance Ministry said in a
statement on Sunday. The Finanzmarktaufsicht regulator put Heta
into resolution and ordered an immediate debt moratorium.
“The decision was triggered by information from Heta’s
management about the first results of an asset review,” the
ministry said. “Because of that dramatic change of the asset
evaluation, the ministry together with the entire government
decided not to invest any more tax money into Heta.”
Heta’s predecessor Hypo Alpe was nationalized in 2009 after
it was close to collapse because of bad loans in the western
Balkans and shareholders led by Bayerische Landesbank walked
away from the bank. Its rescue and wind-down has been
complicated by a string of court cases and by the fact that a
large part of its debt is guaranteed by the Carinthia province,
a former owner of the bank.
No Repayment
The FMA is taking over the wind-down of Heta, which kept
around 18 billion of Hypo’s assets when it was set up last year.
While it works out a resolution plan it won’t repay Heta’s
liabilities under an Austrian law that came into force Jan. 1 to
implement the European Union’s Bank Recovery and Resolution
Directive, the authority said in a statement.
The immediate debt moratorium means 950 million euros of
bonds due March 6 and March 20 won’t be repaid. It affects 9.8
billion euros in outstanding bonds, supplementary capital and
Schuldschein loans, 1.24 billion euros debt to Pfandbriefbank
(Oesterreich) AG, a bank that handles bond issues for Austrian
provinvial banks, as well as loans from BayernLB, according to
the FMA’s decree published on its website.
Putting Heta into resolution means there is no insolvency
procedure, the FMA said. An insolvency would have endangered the
sale of Hypo Group Alpe Adria AG, the “good” part of the
business that’s operating banks in the former Yugoslavia, which
was signed last year but isn’t completed yet, it said. An
insolvency would have made the sale of Heta’s remaining assets
more difficult and led to higher losses for creditors, it said.
Government Guarantee
Avoiding Heta’s insolvency also means that the Carinthia
province’s guarantees for Heta’s bonds aren’t triggered under
Austrian law, the finance ministry said. The ministry reiterated
that it will honor a federal government guarantee for a 1
billion-euro subordinated Heta bond, should it become due.
The FMA’s intervention caps a dramatic development over the
weekend that is described in the authority’s decree.
Heta notified the FMA Friday night at 9:20 p.m. Vienna time
that an asset review that started last year led to write-down
needs of as much as 8.7 billion euros, resulting in negative
equity of up to 7.6 billion euros. It wouldn’t have enough funds
to repay liabilities from next year, Heta told the FMA,
according to the document.
Shortly after that notification Friday night, Heta and the
FMA notified the Austrian government and asked whether it would
recapitalize Heta to make sure the liabilities are repaid. It
answered at 12:24 p.m. today that it wasn’t going to, according
to the document.
For Related News and Information:
Austria Adjusted Law to Allow Bail-In of Heta’s Senior Bonds
Heta Senior Bonds Due Next Month Drop as Austria Weighs Bail-In
Austria Handled Hypo Alpe Rescue Like Amateurs, Commission Says
Top Financial Regulation Stories: TOP FREG<GO>
Top Financial Stories: FTOP<GO>
Top Stories: TOP<GO>
To contact the reporter on this story:
Boris Groendahl in Vienna at +43-1-513-2660-12 or
bgroendahl@bloomberg.net
To contact the editors responsible for this story:
Patrick Henry at +32-2-237-4328 or
phenry8@bloomberg.net
Robin Stringer