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FACTBOX-The bank formerly known as Hypo Alpe Adria: Austria's "bad bank" Heta
March 12, 2015 / 1:21 PM / 3 years ago

FACTBOX-The bank formerly known as Hypo Alpe Adria: Austria's "bad bank" Heta

VIENNA, March 12 (Reuters) - Creditors of defunct lender Hypo Alpe Adria’s “bad bank” Heta will have to wait until around this time next year to be told how its wind-down will cost them as part of Austria’s worst financial disaster since World War Two.

Austria’s financial watchdog FMA stepped in this month and imposed a debt moratorium on Heta until May 2016 after an audit exposed a capital hole of up to 7.6 billion euros ($8.1 billion) which the government was not prepared to fill.

Austria last year introduced a law which chartered new territory for debt markets, wiping out claims of some subordinated Hypo debt holders worth nearly 900 million euros, shaking confidence in Austrian state guarantees.

WHAT HAPPENS NEXT?

- Heta’s results are due by the end of April and should shed some light on the size of the potential hole in its balance sheet which could range between 4 and 7.6 billion euros.

- FMA has commissioned international financial advisors to comb through Heta’s assets. Their Asset Quality Review, expected in the first quarter of 2016, will serve as the basis for FMA’s bail-in decision which it said would not be negotiable.

- Austria wants to close the sale of Hypo’s Balkan network by July to private equity firm Advent International and the European Bank for Reconstruction and Development (EBRD) for up to 200 million euros.

- Creditors who want to take legal action against FMA’s decision on March 1 to suspend Heta debt repayments until May 2016 have three months starting from that day to do so.

WHO IS AFFECTED BY THE DEBT MORATORIUM?

- Hypo’s home province of Carinthia in southern Austria has an annual budget of 2.2 billion euros and would struggle to honour nearly 11 billion euros of backing for Hypo debt that creditors could demand. It is looking at ways to avoid insolvency, further shaking confidence in Austrian state guarantees.

- Germany’s BayernLB, which owned Hypo before it was nationalised in 2009, and Austria are already entangled in a complex web of litigation over the defunct bank, which is likely to be exacerbated by the moratorium.

- Rating agency Fitch said, assuming a haircut of 50 percent and that German banks hold around 40 percent of Heta’s liabilities that are affected by the moratorium, this could cost German banks up to 10% of the sector’s 2015 net profit.

- German mortgage lender Deutsche Pfandbriefbank (PBB) said it has adjusted the value of a nominal 395 million euros of claims against Heta.

- German reinsurer Munich Re said will take a writedown of at least 100 million euros on Heta bonds in the first quarter.

- Dexia Kommunalbank Deutschland said it had 395 million euros of nominal claims against Heta and is considering taking legal action against FMA’s measure.

- Austrian insurer Uniqa is looking into taking legal steps against the Heta debt moratorium.

- FMA does not think the debt moratorium poses a risk to the stability of Austria’s financial system. The FMA has said that Austrian banks and insurers would have a 2-billion-euro exposure to an insolvent Heta. Austria’s biggest banks Erste Bank , Raiffeisen Bank International and Bank Austria, part of Italy’s UniCredit, said they have no or negligeable exposure to Heta debt.

$1 = 0.9406 euros Reporting By Angelika Gruber and Shadia Nasralla; Editing by Vincent Baby

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