Alpine Holding GmbH, the Austrian builder owned by Fomento de Construcciones & Contratas SA, started a 2.56 billion-euro ($3.4 billion) insolvency today, the country’s biggest failure since World War II.
Alpine Bau, the company’s operating unit with businesses in Austria, Germany and eastern Europe, filed for insolvency at Vienna’s commercial court today, credit protection association Kreditschutzverband von 1870 said in a statement. Alpine Holding’s insolvency filing is expected to follow in the next few days, KSV said. The builder’s three bonds were suspended from trading in Vienna after falling to record lows yesterday.
“The efforts of the debtor to restructure its liabilities out of court have failed,” KSV, a group that represents creditors in insolvency procedures, said in the statement. “An additional funding of more than 400 million euros would have been needed to avoid the insolvency.”
Alpine Bau, Austria’s second-biggest builder after Strabag (STR) SE, has 2.56 billion euros in liabilities and equity, KSV said. That exceeds the insolvencies of industrial group A-Tec Industries AG (ATEC) in 2010 and that of retail cooperative Konsum in 1995, making it the biggest insolvency in Austria’s postwar history, said Hans-Georg Kantner, a KSV spokesman.
Alpine has filed a recovery plan under which its viable units would continue, retaining almost a third of its 6,500 employees, while the rest of the group is sold or shut down. Under this proposal, the group would pay creditors about 20 percent of their claims within the next two years, according to KSV. The plan will be reviewed by insolvency administrator Stephan Riel, a Vienna-based lawyer who was appointed today, and needs the approval of a majority of creditors.
The insolvency ends efforts of creditor banks led by Erste Group Bank AG (EBS) and UniCredit Bank Austria AG, which had agreed to cut their 520 million euros of claims by 30 percent in March. That debt cut had left the holders of three bonds worth 290 million euros unscathed. A second debt cut would have required bondholders to contribute to funding needs of 400 million euros together with creditor banks and Madrid-based parent FCC, Alpine said this week.
Michael Mauritz, an Erste spokesman, declined to say how much the bank has lent to Alpine. The bank set aside “sufficient” provisions for the loans in the fourth quarter of last year, he said. UniCredit Bank Austria spokesman Matthias Raftl said the bank set aside provisions that included Alpine’s failure. Bawag PSK Bank AG, another large creditor, didn’t have an immediate comment.
Alpine’s insolvency will add a net charge of 289 million euros to this year’s results, FCC said in a statement. Last year’s accounts already included losses of 420 million euros caused by Alpine, it said. The company’s shares fell as much as 6 percent, the most since Feb. 1, and traded down 5.7 percent at 4:44 p.m. local time.
FCC said in March it would overhaul its business, focusing on its core areas of environmental services, infrastructure works and water management as part of a three-year turn-around plan after posting a 1 billion-euro loss in 2012.
The Austrian government has guaranteed loans to the company to the extent of 150 million euros. How much of that will come due because of the insolvency is unclear, Daniela Kinz, a spokeswoman for the Finance Ministry, said in response to e-mailed questions.
Porr AG (POS), Austria’s third-biggest builder, is interested in buying parts of Alpine’s Austrian businesses, spokesman Juergen Leitner said in an e-mailed response to questions. Talks are already under way, he said. Strabag is not looking at Alpine’s Austrian unit because a deal would probably not get the regulator’s approval, Chief Executive Officer Hans-Peter Haselsteiner said at the company’s general meeting last week.
Alpine made a net loss of 449.7 million euros last year, caused by its German and southeastern European business. The new funding needs arose as a sale of units agreed in March couldn’t be completed as quickly as planned, CEO Arnold Schiefer said yesterday.
The number of corporate insolvencies in Austria climbed 3 percent last year, while the liabilities and equity affected by the insolvencies rose 14 percent to 3.2 billion euros, according to KSV, which mostly represents non-bank creditors such as suppliers in insolvency procedures. The biggest case last year was CE Gas Marketing & Trading GmbH.