Nationalisation of Austria's HGAA costs Bavaria €3.75 billion
The Austrian government on Monday nationalised real estate financier Hypo Group Alpe Adria (HGAA), costing the German state of Bavaria an estimated €3.75 billion.
Austrian Finance Minister Josef Pröll said the move was necessary to save the country’s sixth largest bank from bankruptcy.
"The risk situation of this bank has created an enormous threat for the Republic of Austria, Austria as a financial centre and the entire economic area in the past days and weeks," said Pröll.
The announcement came after a deal was reached for HGAA's owners – Bavaria's BayernLB bank, Austrian mutual insurer Grazer Wechselseitige and the province of Carinthia – to contribute over a €1 billion ($1.46 billion) to the troubled bank.
Participants at the Vienna rescue talks had been in a race against the clock as they sought a solution before the bank opened again on Monday morning.
A spokesman for the Bavarian Finance Ministry told public broadcaster Bayerischer Rundfunk the Austrian bank had cost the southern German state, which owns BayernLB, a total of €3.75 billion. Besides BayernLB selling its HGAA stake to the Austrian government for a symbolic €1, the hefty sum includes several injections of capital and writing off some outstanding debts owed the Bavarians.
“BayernLB’s contribution to the restructuring was necessary,” said Bavarian Finance Minister Georg Fahrenschon. “Together with the Republic of Austria and other shareholders we’ve managed to stabilise a strategically important bank for Austria and southeastern Europe.”
Before the nationalisation, HGAA was 67.08-percent owned by BayernLB, Grazer Wechselseitige held a stake of 20.48 percent, Carinthia 12.42 percent and HGAA employees 0.02 percent.
The German bank acquired the majority stake of 50 percent plus one share in
HGAA for €1.63 billion in 2007 and has subsequently raised its shareholding via capital increases. The decision to part with its stake as a "painful step," said BayernLB boss Michael Kammer.
Last month, the Austrian group announced that massive risk provisions would wipe out the capital injections it received from the Austrian state and shareholders over the past 12 months.