Austria Posts $1 Billion Hypo Alpe Writedown in 2010 Budget

Austria said it quietly booked a 700 million-euro ($1 billion) writedown on its stake in Hypo Alpe- Adria-Bank International AG last year, preparing for a capital decrease the nationalized lender announced yesterday.

Hypo Alpe reduced its capital to wipe out 814.6 million euros of accumulated losses, it said yesterday. The measure canceled 69 percent of Hypo Alpe’s share capital and of non- voting participation capital injected in 2008 and 2009, causing a loss of about 700 million euros for the Austrian government.

The writedown was booked in advance in Austria’s 2010 budget when it was reported to the European Union in March, Harald Waiglein, a spokesman for the finance ministry, said in a telephone interview. The information wasn’t released publicly at the time because Hypo Alpe had yet to make a formal decision to reduce its capital, he said.

Hypo Alpe, based in Klagenfurt, Austria, had a net loss of 1.06 billion euros last year, following deficits of 1.6 billion euros in 2009 and 520 million euros in 2008. The losses were due to ballooning bad debt in the former Yugoslavia, where it had expanded rapidly until 2008. The lender said it aims to break even in 2011 and may start the sale of its Italian and Austrian units this year.

Austria nationalized Hypo Alpe in December 2009 to avert the bank’s collapse as former owners, including Bayerische Landesbank, withdrew their support. BayernLB, which bought a majority stake from the Austrian province of Carinthia in 2007, wrote down the investment by 3.7 billion euros.

Following the capital decrease, Austria will swap a remaining stake of 450 million euros in non-voting participation capital injected in 2010 into common shares, Hypo Alpe said yesterday.

To contact the reporter on this story: Boris Groendahl in Vienna bgroendahl@bloomberg.net

To contact the editor responsible for this story: Angela Cullen at acullen8@bloomberg.net

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