Austria might move ÖVAG assets to Hypo

According to a report from Bloomberg, Austrian regulators are considering the option to move non-performing assets from the ailing Volksbank AG (ÖVAG) into the portfolio of the disastrous Hypo Alpe Adria Bank.

Austria might move ÖVAG assets to Hypo
File Photo: APA

Austria's parliament recently passed a law that saw many important bond holders for the ill-fated Hypo Alpe Adria Bank lose significant amounts of money.

Now, certain assets within Austrian Volksbank AG are causing considerable losses, such as ÖVAG’s Romanian unit, plus a portfolio of corporate and real estate loans.  By moving these non-performing assets under the umbrella of the already-failed Hypo Alpe Adria Bank, the Austrian Volksbank could significantly improve its capital ratios.

Further, such a move could reduce the need for write-downs if ÖVAG fails the European Central Bank’s Comprehensive Assessment in October, according to un-named sources familiar with the matters.

According to a report last week in the Austrian daily Der Standard, Volksbanken-Verbund, the combination of ÖVAG and nearly 50 regional cooperative banks that own it, will likely fail the health check the ECB is conducting before it begins to supervise euro-area banks on Nov. 4.  

There is likely to be a capital shortfall of €600 million (US$788 million) to €800 million.

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Agreement reached on failed bank bailout

Austrian Finance Minister Hans Joerg Schelling said Wednesday an agreement in principle had been reached with the stricken Hypo bank's creditors that had threatened to bankrupt the state of Carinthia.

Agreement reached on failed bank bailout
Hypo Group Alpe Adria headquarters. Photo: HGAA Website

“We're drawing a definitive line under the Hypo affair” the minister told journalists, referring to state bank Hypo Group Alpe Adria (HGAA), which has saddled Carinthia with 11 billion euros in debt.

The deal will see creditors receive 75 percent of the face value of the HGAA bonds they own. They will be offered to buy that value of Austrian government bonds at 75 percent face value.

The proposal is better than the one creditors rejected in March as the Austrian government bonds mature in 13 instead of 18 years.

Schelling said an agreement in principle has been signed with a portion of creditors and compensation could be launched in September.

The creditors include Germany's Commerzbank and a Dexia unit, according to Bloomberg.

The saga is a legacy of late Austrian far-right political Joerg Haider, formerly premier of Carinthia, who died in 2008.

Under Haider, HGAA expanded into the Balkans as well as Italy and Germany via acquisitions and risky investments, expanding its balance sheet fourfold to some 40 billion euros.

Bavaria's state lender BayernLB bought a majority stake in 2007 in HGAA but two years later, as the global financial crisis raged, the bank came close to collapse and Austria nationalised it.

After a long and bitter dispute, Austria finally agreed last November to pay Bavaria 1.23 billion euros to put an end to the feud.