Erste Hungary Rejects Call to Share Municipality Debt Burden

Erste Group Bank (EBS) AG’s Hungarian unit “unambiguously rejected” a call from the Hungarian city of Hodmezovasarhely to share losses on the town’s foreign-currency debt, Mayor Janos Lazar said.

The bank offered to change the repayment terms of the city’s Swiss-franc denominated bonds only if it repays 10 billion forint ($45 million) of debt in one sum, according to an e-mailed statement from Lazar, who is also the head of the ruling Fidesz party’s parliamentary group.

“Erste Bank’s ultimatum is unrealistic and unfeasible,” Lazar said today.

The politician asked Erste on Dec. 29 to share losses on bonds worth 69.4 million Swiss francs ($74 million), issued in 2006 at an exchange rate of 173.4 forint per franc. The current exchange rate is above 243.55 forint per franc.

The municipality, which is servicing its debt, will make a decision on future proceedings on Feb. 2, according to the statement.

Erste doesn’t wish to comment on the content of the letter as that includes business and banking secrets, spokeswoman Emese Danks said over the phone.

To contact the reporter on this story: Edith Balazs in Budapest at ebalazs1@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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