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EU Almunia Flexible on Hypo Alpe Deadline If Plan OK

The European Union’s top antitrust official indicated he may extend a deadline for the breakup of Austria’s Hypo Alpe-Adria-Bank International AG so long as the nationalized lender sticks to a credible plan.

Joaquin Almunia, the EU’s competition chief, told journalists in Brussels today that he may be able to approve a new roadmap the Austrian government filed on June 29 “very, very soon” should it meet expectations. The document, which Austria said includes accelerated asset sales and curbs on new business, must be “credible” and in line with what was agreed in preparatory talks to justify more time for the sale of Hypo Alpe’s main unit, Almunia said.

“I told them I’m looking forward to receiving the restructuring plan if the restructuring plan for Hypo Alpe Adria includes all the elements that have been discussed with me, with my cabinet,” Almunia said. “In this case my concern regarding the deadlines for divestments diminish very quickly.”

Almunia told Austria in March its plans for Hypo Alpe weren’t good enough to justify the 2.2 billion euros ($2.9 billion) in aid the lender received since 2008, and he may order Hypo Alpe to repay it. That would lead to insolvency and as much as 16 billion euros in losses, according to estimates by the Austrian central bank.

Task Force

A task force led by former central bank governor Klaus Liebscher was installed in May to draft the new arrangement. Hypo Alpe Chief Executive Officer Gottwald Kranebitter stepped down yesterday and Chairman Johannes Ditz resigned last month citing disagreements over the plan.

Under Austria’s new proposal, Hypo Alpe will complete the sale of its Austrian unit this year, will stop accepting new business in Italy immediately and will sell its biggest unit, a network of banks in the former Yugoslavia, by mid-2015, bringing the disposal forward by more than a year. The steps will require writedowns of the bank’s first-half earnings and new capital, Hypo said two days ago, without elaborating.

The bank may need as much as 2 billion euros in extra capital due to the concessions this year, two people with knowledge of the situation, who asked not to be identified because talks with the EU are confidential, said last week. Austrian Finance Minister Maria Fekter said yesterday that 700 million euros earmarked in Austria’s 2013 budget will suffice for any needs arising in the first-half results.

Austria expects an EU ruling on the roadmap by the autumn, Fekter told Austrian newspaper Wirtschaftsblatt in an interview published today.

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