Debt Relief

Austria Cuts a Deal with Heta Creditors

schelling-munsberg DPA-picture alliance-michael gruber
Austria's Finance Minister Hans Jörg Schelling (r) and Friedrich Munsberg (l), spokesman for the umbrella group of Heta creditors, meet at the HETA press conference in Vienna,
  • Why it matters

    Why it matters

    The Austrian government deal with creditors of “bad bank” Heta is needed to settle a dispute that risked the country’s first provincial bankruptcy.

  • Facts

    Facts

    • Hypo Alpe Adria was nationalized in 2009.
    • Austria’s previous offer to pay 82 percent of creditors’ claims was rejected.
    • Some 72 Heta creditors have agreed to the new compromise.
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  • Audio

    Audio

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Heta creditors have struck a preliminary deal with the Austrian government to settle a debt dispute that risked the country’s first provincial bankruptcy.

Under the agreement announced Wednesday, they agreed to a 10 percent reduction on €11 billion ($12.4 billion) of state-guaranteed debt, in a move that effectively grants debt relief to the province of Carinthia.

In previous negotiations, the creditors, mostly German banks and insurers, considered any form of debt relief to Carinthia to be taboo, arguing that the province was not unable but unwilling to to pay, and that the federal government could easily provide financial support.

Under the deal, they can expect about 90 percent of their loans to be covered, with a 13.5-year, zero-coupon bond payback offer as a sweetener.

The price of shares of creditor Deutsche Pfandbriefbank, or PBB, reacted to the preliminary agreement with a bounce, increasing by 3.5 percent. The compromise with Austria will provide PBB with an additional €132 million in cash.

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