By Eyk Henning
German bank BayernLB on Thursday filed a lawsuit against the
Austrian government for implementing a law that forces creditors of
nationalized lender Hypo Group Alpe Adria to take losses on more
than EUR1.5 billions ($1.91 billion) of loans.
With the law, "Austria dispossesses BayernLB and numerous other
investors including the World Bank," said Chief Executive
Johannes-Jörg Riegler, adding that Austria's move violates its own
constitution and European Union law.
The Munich-based lender, which is owned by the regional
government, filed the lawsuit with the Austrian constitutional
court.
Bankers and analysts have warned that forcing losses on
creditors might undermine investors' confidence in Austria's
banking sector because it signaled higher legal uncertainty.
The Austrian finance ministry said in a written statement that
BayernLB's move was no surprise and it is being considered. It
added that Austrian courts will further examine the claim.
Hypo Group Alpe Adria ran into trouble in 2006 and was
nationalized by Austria in 2009. When mounting losses at Hypo
threatened to boost Austria's debt to GDP ratio, the country's
government this summer implemented a law that forces creditors of
Hypo Alpe Adria to share some of the burden and forego on more than
EUR1.6 billion in bonds, even though the debt was guaranteed by the
Austrian government.
Around EUR800 million of that sum is expected to be incurred by
Germany's BayernLB according to the law. Other creditors, including
the World Bank, Deutsche Bank AG's mutual fund unit DWS and Vienna
Insurance Group AG, are expected to give up on combined claims of
around EUR890 million in subordinated bonds.
The law also foresees that Hypo can defer the repayment of
another EUR1.5 billion in loans to BayernLB, that were due in 2012
for five more years.
Write to Eyk Henning at eyk.henning@wsj.com