BayernLB Unsuccessful in Appeal of Hypo Purchase Ruling

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Bayerische Landesbank failed to convince a Vienna appeals court that it was duped into buying more than half of Hypo Alpe-Adria-Bank International AG in a 2007 deal in which the German state-controlled bank lost billions of euros.

The Higher Regional Court of the Austrian capital upheld the Dec. 12 verdict of the Vienna commercial court, rejecting BayernLB’s demand to rescind the deal or be reimbursed for damages, according to the text of the ruling, which was obtained by Bloomberg.

Even though BayernLB was deceived about capital levels by one of Hypo Alpe’s shareholders and the bank’s management, it was so intent on gaining access to the fast-growing market in south-eastern Europe that it would have made the 1.625 billion-euro ($1.8 billion) purchase regardless, judge Klaus Dallinger wrote in the ruling dated April 30.

“The growth and earnings potential of HBInt was predominant for the plaintiff, whereas its capital position wasn’t of particular concern,” Dallinger wrote, using an abbreviation for Hypo Alpe.

BayernLB, which eventually lost 3.75 billion euros with the Hypo Alpe investment, took note of the ruling and is analyzing the court’s reasoning, spokesman Matthias Luecke said by e-mail. The Bavarian state bank, Hypo Alpe’s successor Heta Asset Resolution AG and several other parties are ensnared in a web of legal disputes more than five years after Austria nationalized Hypo Alpe to prevent its collapse under bad loans.

Overstating Capital

The court agreed with the lower court in finding that Hypo Alpe’s workers’ trust, MAPS, misled BayernLB by overstating Hypo Alpe’s capital level in 2007. The other shareholders were the province of Carinthia, a group of investors led by former Hypo Alpe Chief Executive Officer Tilo Berlin and insurer Grazer Wechselseitige.

The bank’s capital was inflated through shares that were later found ineligible as bank capital. Some shares had been bought with loans from Hypo Alpe itself, while others allowed the holders to sell the stock back to Hypo Alpe. Former Chairman Wolfgang Kulterer, who was also MAPS’s chairman, is in jail for those deals.

Even taking this into account, BayernLB, fresh from losing a takeover battle for Austria’s Bawag PSK Bank AG to Cerberus Capital Management LLP in 2006, would have been prepared to look the other way, the court said, corroborating the findings of the lower court.

“The plaintiff and the auditor that advised it didn’t find HBInt’s core capital ratio was of particular significance,” the ruling stated. “This court shares the view of the court of the first instance that the plaintiff would have signed the contract even if, hypothetically, there had been disclosure.”

The case is: OLG Wien, 2 R 33/15k.

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