Heta Creditors Stand Firm as Deadline for Discounted Offer Nears

  • Lock-up agreement is legal and won't be lifted, group says
  • Parties in gridlock two days before Carinthian offer runs out

Heta Asset Resolution AG’s creditors rebuffed Austrian demands to lift a lock-up agreement, increasing the likelihood that a discounted offer for 10.8 billion euros ($12 billion) of the bad bank’s debt will fail as the March 11 deadline nears.

Austria and the province of Carinthia, a former owner of Heta which still guarantees its liabilities, “would be well advised to meet their obligations and fulfill their liabilities, instead of calling on the creditors to terminate binding contracts,” the group said in a statement. The creditors allied in the umbrella group control more than 5 billion euros of Heta’s debt, enough to block a tender offer launched by Carinthia in January.

Carinthia is offering Heta creditors 75 percent of face value for senior debt, and 30 percent for junior debt to neutralize the guarantees it gave when it still owned the bank. Austrian Finance Minister Hans Joerg Schelling last week sweetened the offer with an 18-year zero-coupon bond priced below market rates.

On Tuesday, Schelling called on creditors to terminate the lock-up agreement preventing their members from accepting the offer, warning they may violate cartel rules. The creditors, which include Commerzbank AG, Pacific Investment Management Co. and Dexia SA’s German unit, reiterated that the pact conforms to “legally approved” standards and that it won’t be lifted.

While Austrian officials have said that there will be no second offer for Heta’s debt if the first one fails, creditors renewed their demand for negotiations in order to settle the dispute. Talks over the last few weeks in which creditors presented their proposals to end the gridlock were aborted by the Austrian finance ministry, they said.

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