Hypo Alpe-Adria-Bank International AG, the nationalized Austrian lender crippled by bad debt, won European Union approval for government support worth almost 3 billion euros ($4 billion) and future aid in exchange for accelerating its breakup.
The European Commission approved a restructuring plan that foresees as much as 8 billion euros in total state aid to 2017, according to a presentation handed out by the Finance Ministry at a Sept. 2 briefing in Vienna. Austria may also provide as much as 3.2 billion euros in liquidity, according to the document.
“This was the best result we could achieve,” Finance Minister Maria Fekter said at the briefing. The deal paves the way for an “orderly withdrawal” from the bank, she said.
Under the agreement, Hypo Alpe will complete the sale of its domestic unit by the end of the year, stop new business in Italy and sell its Balkan bank network by mid-2015. Austria refiled its Hypo Alpe restructuring plan after the EU’s competition commissioner Joaquin Almunia told the Alpine Republic he doubted the bank’s viability and criticized vague government plans to unwind the lender.
Hypo Alpe already agreed to sell its Austrian unit, which operates mainly in the country’s southern Carinthian province, to Anadi Financial Holdings for 65.5 million euros. It is currently revisiting plans to spin off a bad-asset unit that would reduce capital needs.
Bad Bank Plan
It is not yet clear how many assets can be transferred into a separate wind-down unit, Chairman Klaus Liebscher said at the briefing yesterday. He expects to make several proposals to the government by early October, he said.
Hypo Alpe asked advisers to come up with a plan for a unit with at least 12 billion euros in assets, people familiar with the matter said in July.
The bank lost 860 million euros in the first six months of this year after the restructuring proposal caused risk provisions to surge. Austria already gave 700 million euros in fresh capital, the amount it had set aside for Hypo Alpe in this year’s budget. Without a bad bank, the lender may need as much as an additional 2.3 billion euros this year, the Finance Ministry said.
The target of a balanced budget in 2016 is still possible to reach, even after fresh aid for Hypo Alpe, Fekter said. “There is no reason to revise the path we chose,” she said.
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