Austrian Supervisor FMA to Uphold Heta Moratorium Amid Appeals

  • FMA expects to confirm main `substance' of resolution decree
  • Not involved in Heta debt tender plans by Austria/Carinthia

Austria’s bank supervisor expects to uphold the debt moratorium it ordered on “bad bank” Heta Asset Resolution AG amid 272 appeals that were filed against its decree, according to the agency’s two chairmen.

The FMA, or Finanzmarktaufsicht, is still working on winding down Heta and on a response to the appeals, which were mostly filed by creditors against a March 1 decision to halt all debt payments. While it may adjust some formal aspects of the decree, the main substance won’t be overturned, the financial market authority told reporters.

“There’s no difference to March,” said Helmut Ettl, who heads FMA together with Klaus Kumpfmueller. “We had a few months to think it all through and check it, but actually found out that we would issue the same decree again.”

Kumpfmueller added that “there are many formalities that need to be reviewed and there will be some amendments, but the substance of the decree stands.”

Bond Offer

Heta is managing the remnants of Hypo Alpe-Adria-Bank International AG, one of the most damaging Austrian bank failures after the 2008 financial crisis. Austria spent billions of euros to prop up Hypo Alpe after nationalizing the bank in 2009, angering voters and undermining the country’s credit ratings.

The FMA ordered Heta’s resolution -- and the debt moratorium -- after the Austrian government said it would stop plugging Heta’s capital holes. The authority started working on the appeals Sept. 14 and will issue an amended decree when it’s finished its review. Several creditors, the biggest of which are German banks and insurers, have also sued Heta in German courts to protest the moratorium.

Heta’s wind-down is complicated by the fact that the province of Carinthia, its former owner, guarantees for 11 billion euros of Heta’s debt. Austria and Carinthia are working on a tender offer for those guaranteed bonds to defuse the threat of a Carinthian insolvency. Finance Minister Hans Joerg Schelling has said the offer could be published as soon as next month.

The bond offer will be partly based on the expected recovery rate for Heta’s assets -- mostly distressed debt and seized properties in the former Yugoslavia. While the FMA is working on a wind-down plan that will also result in a debt cut next year, it’s not involved in the planning of the tender offer, Ettl said.

“We’re not working with one eye cast on that,” he said. “What creditors do among themselves or with third parties isn’t our concern.”

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