Creditors settle debt deal over failed Austrian bank

Creditors have settled their dispute with Austria's failed regional bank Hypo Alpe Adria, the liability fund of the province of Carinthia said Monday.

Nearly 99 per cent of Hypo's creditors agreed to the deal, which foresees Austria buying back loans and allowing them to recoup 90 per cent of the outstanding 11 billion euros (12.3 billion dollars) within 18 years, the Carinthian fund said.

Creditors who want their payout immediately will receive only 75 per cent of their investment.

The Austrian state will foot most of the bill for buying back the outstanding debt - up to 10.5 billion euros.

Taxpayers will likely pay a large part of this sum, as the liquidation of Hypo's former assets is not expected to cover the full amount needed to satisfy the creditors.

The haircut prevents Carinthia's bankruptcy after the small southern province, which partly owned Hypo, guaranteed the bank's debt and promoted its high-risk expansion strategy in the Balkans.

Hypo financed questionable tourism and real estate projects in the Balkans without due diligence.

Carinthia backed Hypo's bonds, mostly bought by major German banks and insurers.

Austrian legislators on Monday presented the result of a large-scale parliamentary inquiry into the failure of Hypo, which was nationalized in 2009 and has been liquidated since then.

Green representative Werner Kogler criticized the Austrian government for having stepped in too late to avert the Hypo disaster, and for offering a haircut that was too generous.

"The federal government should have been more courageous," the opposition legislator said.

Last update: Mon, 10/10/2016 - 17:40
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