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Austrian report
by Euro Reporter
2016-10-13 10:51:37
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Austria’s Heta drama ends with 99% of bondholders accepting deal

For bondholders, Austria’s worst post-war bank failure is almost over. Creditors owning 98.7 percent of the 11 billion euros ($12.3 billion) of debt issued by bad bank Heta Asset Resolution AG accepted a discounted offer from the Carinthia province, the bank’s former owner, the vehicle managing the tender said on Monday. The deal prevented an unprecedented provincial insolvency in a core euro-area country. “We’ve finally dealt with the trouble a previous government got us into with its reckless borrowing,” the Carinthia province’s governor, Peter Kaiser, said on Austrian public radio station Oe1. “This was a joint effort of the federal and provincial governments, and I’ll be very glad when we’ve put this behind us.”

austria_400_01Austria last year started the effort to draw a line under years of taxpayer-funded bailouts of Heta and its predecessor, Hypo Alpe-Adria-Bank International AG, which crumbled under bad loans in the former Yugoslavia. Finance Minister Hans Joerg Schelling, who is funding the deal via the Austrian Treasury, sweetened an earlier tender offer to ensure acceptance. Under the terms of the deal, creditors can choose to receive zero-coupon bonds in exchange for their Heta debt. Senior bonds, which make up the vast majority of the offer, can be swapped for a security with a net present value of 90 cents on the euro. Junior creditors have the choice between a zero-coupon bond or a Schuldschein loan, both worth around 45 percent of face value. European regulators forced banks including Commerzbank AG and Deutsche Pfandbriefbank AG to write down the bonds by 50 percent when Heta was put under a debt moratorium in 2015. Those banks will be able to book windfall gains this year, according to Moody’s Investors Service.

“The resulting one-off gains and elimination of uncertainty about these illiquid assets’ values are credit positive for the exposed banks,” Moody’s said. The deal is even more profitable for the hedge fund investors who bought Heta at distressed prices in 2015. Heta’s most liquid senior bonds had dropped to as little as 47 percent of face value in February 2015 and traded in the 50s and 60s for much of 2015. Distressed debt specialists who owned Heta bonds included Bybrook Capital, Canyon Capital Advisors, Cyrus Capital Partners, Farallon Capital Europe, Knighthead Capital Management, and Redwood Capital Management. The offer became necessary after Carinthia, with an annual budget of less than 3 billion euros, said it wouldn’t honour the debt guarantees it had issued for Heta’s predecessor, Hypo Alpe. The province will now contribute 1.2 billion euros to fund the deal. On top of that, the federal government will invest about 8 billion euros in the transaction. Those funds are effectively turned into a claim on Heta’s wind-down proceeds, the money the bad bank manages to raise with the sale of non-performing loans, real estate and other assets such as cars and yachts. Heta’s current plan foresees 7.7 billion euros of residual cash in 2020. Austria’s federal government has so far pumped 5.5 billion euros into the bad bank, and pre-paid 1.2 billion euros to the German state of Bavaria, who’s Bayerische Landesbank, a former owner of Hypo Alpe was the bank’s single-biggest creditor.


A highway in Austria was terrorized by drunk birds

When birds fall out of the sky, people think the worst—apocalypse, environmental catastrophe, mass bird protest. Sometimes, though, the birds are just drunk. That's what happened yesterday in Austria, where a whole flock of starlings guzzled down fermented berries and then decided to mess with some drivers. Soon, they were dive-bombing the A2 motorway, crashing into cars and trucks and causing miles-long traffic jams, The Local reports.

This happens to birds surprisingly often, especially in the fall, as freezing and thawing cycles turn berry juice into alcohol. "Most birds likely just get a bit tipsy," Meghan Larivee, a scientist with Canada's Environment Yukon, told National Geographic in 2014 after an incident with some hammered waxwings. "However, every now and then, some birds just overdo it." In those cases, she says, "They cannot coordinate their flight movements properly or at all." But they probably think they're doing awesome.


Austrian Chancellor says his country is not racist

Austria’s Chancellor Christian Kern has denied that Austria is a country full of racists, ahead of the upcoming presidential election which could see the far-right candidate win. People will vote because of what they are afraid off, said Austria’s Chancellor Christian Kern, adding that Austria is not a country full of racists. He was commenting on the upcoming presidential election in which the far-right candidate, Norbert Hofer of the Freedom Party (FPÖ) could win.

In an interview with Italian TV station RAI 3, Kern explained that not everybody who decides to vote for Hofer is necessarily a supporter of far-right ideology. He pointed to the rise in support for the US presidential candidate Donald Trump and the French right-wing populist Marine Le Pen. “People are choosing to vote against the establishment,” he said.

As reported by The Local, Hofer narrowly failed to be elected president in a runoff election in May after being beaten by independent ecologist Alexander Van der Bellen by just 31,000 votes. But the FPÖ managed to have the election annulled in July because of procedural irregularities. The re-run of the vote will now take place on December 4th. Hofer and Van der Bellen are running neck-and-neck in opinion polls. In a separate report, Italy’s ANSAmed news agency noted that the Italy-Austria border at Brenner will open without major checks, as announced by Kern. “I wasn’t in favour of the wall and I’m not in favour of it now,” Kern was quoted as saying during his interview with RAI 3 radio. “It is clear that within Europe we should avoid building internal borders. We believe it is much more efficient to help the migrants in their home countries. This is where Europe needs to provide answers.”


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