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UPDATE 1-Austria increases 2016 borrowing forecast after Heta deal
October 11, 2016 / 10:56 AM / a year ago

UPDATE 1-Austria increases 2016 borrowing forecast after Heta deal

(Adds financing agency’s comments)

VIENNA, Oct 11 (Reuters) - Austria will borrow roughly 3 billion euros ($3.4 billion) more this year than originally planned, to lend the province of Carinthia the money to buy bonds of “bad bank” Heta Asset Resolution, the Federal Financing Agency said on Tuesday.

Carinthia said on Monday that almost all Heta’s creditors, which hold bonds with an original face value of 11 billion euros, had accepted its buyback offer. Most of them will receive three-quarters of that face value, which they can top up by reinvesting that money in a bond guaranteed by Austria.

Heta creditors holding senior bonds, the bulk of the paper, can sell their top-up bonds back to Carinthia within a 180-day window starting on Dec. 1. The Federal Financing Agency based its planning on the assumption they would all sell this year, meaning it had to cover all 9.3 billion euros in potential costs in its forecast.

The Federal Financing Agency increased the amount it expects to borrow this year to 30 billion to 33 billion euros, though it left the expected amount of government bonds unchanged.

“The 9.3 (billion) are included in the 30-33 (billion),” the head of the agency, Markus Stix, said in a telephone interview.

In its funding outlook for 2016 published in December, the Federal Financing Agency said Austria planned to borrow 27 billion to 30 billion euros this year, of which 20 billion to 22 billion would be government bonds. The agency also issues treasury bills and medium-term notes and raises loans.

Had it not been for the Heta buyback deal, the agency would have lowered its forecast for the year to 24 billion to 27 billion euros because of a large number of put options on government bonds that were not exercised, Stix said.

The borrowing linked to Heta would include regular bond auctions, treasury bills and the syndicated issue it has yet to carry out this year, Stix said. ($1 = 0.8928 euros) (Reporting by Francois Murphy; Editing by Kirsti Knolle and Alison Williams)

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