Austria to War-Game Debt-Guarantee Scenarios for Bad Bank
By Boris Groendahl - 11/giu/2015 14:11:45
Austria’s Finance Ministry and the province of Carinthia have set up a panel to figure out how to deal with 10.2 billion euros ($11.5 billion) of debt guarantees for “bad bank” Heta Asset Resolution AG.
The group will analyze various scenarios for handling the guarantees in the next two months and will then seek talks with creditors and with the FMA regulator that oversees Heta’s wind-down, Carinthian Governor Peter Kaiser said in a statement on the government’s website after a meeting with Finance Minister Hans Joerg Schelling in Klagenfurt on June 11.
“Kaiser observed that Carinthia has a rocky path ahead,” according to the statement. “The key goal is to remove the sword of Damocles of the Heta guarantees and the threat to Carinthia’s future that they represent.”
Regulators took over Heta’s resolution and imposed a 15-month debt moratorium on March 1 after the government stopped sponsoring the wind-down of failed Hypo Alpe-Adria-Bank International AG. Carinthia has said it won’t be able to honor the guarantees, which exceed four times its annual budget, if losses are imposed on bondholders.
Schelling has told the province, which owned Hypo Alpe until 2007, to use the moratorium for talks with Heta’s creditors about a restructuring of the guarantees. While the federal government isn’t liable for the debt, it’s ready to lend Carinthia money if it reaches a deal to reduce the debt, he said in an interview April 29.
Heta’s two most liquid bonds are both trading at about two thirds of face value. The 2 billion-euro 4.375 percent bond due 2017 and the 1.25 billion-euro bond due 2016 were both bid for at 65 cents on the euro today, little changed from yesterday, according to prices compiled by Bloomberg.