Klaus Liebscher quit as chairman of the nationalized Austrian lender Hypo Alpe-Adria-Bank International AG after the government hired a former Morgan Stanley banker to advise on imposing losses on some bondholders.
Liebscher, an ex-central bank governor who opposed plans for a bail in of bondholders of the failed lender, quit for “personal reasons,” Hypo Alpe said in a statement today.
Austrian Finance Minister Michael Spindelegger, faced with rising public anger over the costs of propping up Hypo Alpe, is looking into the possibility of requiring some holders of a tranche of 12.5 billion euros ($17.2 billion) of the company’s debt to accept losses, he told journalists in Vienna.
“What financial markets expect is not always what you want politically,” Spindelegger said. “We need to find the model that’s the best result for taxpayers. That may not comply with the markets, but it will be necessary.”
Spindelegger and Chancellor Werner Faymann are under public pressure to draw a line under the Hypo Alpe rescue even if that means pulling the plug. After spending 4.8 billion euros of taxpayer money on the bank in the last four years, two-thirds of Austrians disapprove of the handling of the affair. The same proportion favors stopping support and letting the bank go insolvent, according to a Gallup poll for the Oesterreich newspaper last week.
Dirk Notheis, Morgan Stanley’s former Germany chief, will help Austria judge proposals made by a “task force” of experts installed earlier that was led by Liebscher, Spindelegger said. Central bank Governor Ewald Nowotny will now lead the task force, the Finance Ministry said in a statement.
Spindelegger declined to elaborate whether or how Austria may deal with bondholders, only saying that he’s targeting debt guaranteed by the province of Carinthia, Hypo Alpe’s former owner. Bonds issued with a guarantee by the federal government aren’t at risk, he said.
Hypo Alpe’s 4.375 percent bond maturing in 2017, guaranteed by Carinthia, fell 1.625 percentage points to a record low of 83.8 percent of face value.
Hypo Alpe’s guaranteed bonds had dropped to record lows when a debate about the bank’s possible insolvency first surfaced in November and again when Moody’s downgraded the securities by four levels last week.
Spindelegger also reiterated he is seeking funds for the rescue from other former owners including Carinthia and Bayerische Landesbank, a German state-run bank based in Bavaria, which owned 67 percent of Hypo Alpe before walking away in 2009 with a loss.
Fitch Ratings reiterated its stable outlook for Austria’s top AAA credit rating today, even as it said Hypo Alpe’s restructuring “will likely cause gross general government debt to rise more than previously expected.”
“The government has yet to disclose its preferred solution, raising concerns about policy coherence and credibility,” Fitch said.
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