Jan. 31 (Bloomberg) -- Bawag PSK Bank AG, the Austrian lender controlled by U.S. private-equity groups, walked away from mediation talks over 417 million euros ($566 million) it is seeking from the Austrian city of Linz.
Bawag, controlled by Cerberus Capital Management LP and GoldenTree Asset Management LP, will focus on the case pending in the Vienna Commercial Court, it said in an e-mailed statement today. Bawag sued Linz in November 2011 after Linz had sued the bank, saying it didn’t inform Austria’s third-biggest city about the risks of a 195 million Swiss franc ($214 million) swap contract closed in 2007.
“Bawag PSK continues to be interested in settling with the city of Linz out of court, but if necessary it is ready to fight the case through all instances,” Bawag said in the statement.
The city of Linz said in an e-mailed statement that the mediation, which started last year, can’t be terminated unilaterally, and that it thought the mediation was useful.
Disputes over swap agreements, typically used by municipal agencies to lower interest payments, have spread through Europe with lawsuits in Germany, Italy and the U.K. Deutsche Bank AG, Europe’s biggest lender by assets, in March lost a case over swaps in the first ruling by Germany’s highest court concerning sales of the products.
Linz, which also says the contract was entered into without proper approvals, is seeking 30.6 million francs in the case.
GoldenTree acquired a 39 percent stake in Bawag last year. New York-based Cerberus holds 52 percent of the bank, which is Austria’s fourth-biggest lender.
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