Austria on Good Way to Avoid $21 Billion Hypo Alpe CrashBoris Groendahl
Austria’s central bank said Hypo Alpe-Adria-Bank International AG will likely avoid a 16 billion-euro ($21 billion) insolvency as policy makers negotiate with the European Commission over the nationalized lender.
“The government is on a very good path with the Commission, therefore I don’t think that there is an immediate threat,” Andreas Ittner, a director at the nation’s central bank, told journalists in Vienna today.
Ittner said a 16 billion-euro loss was possible if Hypo Alpe was forced by the Commission into immediate repayment of government aid that would trigger insolvency, confirming a figure first published by Profil magazine last month. Hypo Alpe is the third-biggest lender in the nations of the former Yugoslavia, which have the potential to complicate the situation by seizing local assets, according to Austrian policy makers.
Joaquin Almunia, the European Union’s top antitrust official, told Austria in March that its restructuring plan for Hypo Alpe wasn’t good enough to justify retaining about 2.2 billion euros of state aid the lender has received since 2008, and he may order Hypo Alpe to pay it back. A task force led by former central bank governor Klaus Liebscher is aiming to satisfy Almunia by drafting a new plan.
Repaying the 2.2 billion euros right away could force Hypo Alpe into insolvency, according to a central bank document that was first reported by Profil and also obtained by Bloomberg News. The Balkan countries where Hypo Alpe is active may nationalize its local arms in the case of an insolvency, freezing as much as 10.4 billion euros the parent company lent to the units, according to the document. Ittner declined to elaborate on the loss calculation.
Hypo Alpe is seeking buyers for its businesses in Austria, Italy and the former Yugoslavia, where it trails only Nova Ljubljanska Banka dd and UniCredit SpA in terms of total assets. Another unit owns non-performing assets that will be wound down, including Croatian hotel loans, leasing deals across eastern Europe and assets seized as loan collateral, such as shopping malls, yachts and tractors.
The sale of the Austrian unit, which had 4.1 billion euros of assets at the end of last year, is in the “final phase,” Hypo Alpe spokesman Nikola Donig said by phone. He declined to elaborate. India’s Srei Infrastructure Finance Ltd. today denied reports in Austrian media that said it’s bidding for the business, and isn’t looking at buying any European bank, according to a spokesman.
The sale could raise 100 million euros, Kurier reported today, without saying where it got the information.
Hypo Alpe originally proposed to sell the Austrian business next year and dispose of the ex-Yugoslav unit, with 10 billion euros of assets, by 2016, according to the central bank document. That plan was rejected by Almunia, who wants all units to be sold this year, the document said.
A quick sale of the Austrian unit may appease Almunia and gain more time to sell the Balkan lenders. Hypo Alpe has sent information memorandums to about 10 potential bidders for the ex-Yugoslavia unit, which comprises banks in Slovenia, Croatia, Serbia, Montenegro, and Bosnia and Herzegovina, Donig said. He declined to elaborate.
Austria is also revisiting plans to spin off the “bad bank” wind-down unit, which already is its biggest division, accounting for 11.7 billion euros of total assets. Such a vehicle could be modeled on Germany’s FMS Wertmanagement AoeR, the bad bank for Hypo Real Estate AG, or Ireland’s National Asset Management Agency. Finance ministry spokesman Gregor Schuetze declined to comment on the status of the EU talks.
According to calculations by Hypo Alpe, Austria may have to inject at least 2.5 billion euros more into the lender if it accelerates the sales, on top of the 700 million euros already earmarked in this year’s budget.