FRANKFURT--A German court ruled on Friday that Austria's Heta
Asset Resolution AG, the "bad bank" of failed Austrian lender
Hypo-Alpe-Adria International Group AG, must pay billions of euros
to Germany's BayernLB, a bank controlled by the state of
Bavaria.
The regional court in Munich said Heta, which is controlled by
the Austrian government, must pay back loans to BayernLB, a victory
in BayernLB's attempt to recoup EUR2.35 billion ($2.66 billion) in
unsecured credit lines it has to Heta.
The Munich regional court's judge ordered Heta to repay loans
worth about EUR1.03 billion plus debt of around 1.3 billion Swiss
francs (EUR1.25 billion), plus interest, the court said.
Heta said it plans to appeal the decision.
In 2007, Hypo Alpe Adria was bought by BayernLB, which owned a
majority stake in the bank until it was nationalized in 2009. Since
then, the government in Vienna and BayernLB have been battling over
who should bear the growing cost of winding down Hypo.
A spokeswoman for the Austrian finance ministry said Friday the
court ruling wouldn't have any impact on Austria's public
finances.
In March of this year, the Austrian government implemented new
European legislation that attempts to limit the burden of bank
resolution on taxpayers. After finding Heta had a capital shortfall
of between EUR4.6 billion and EUR7.6 billion, the Austrian
government said it wouldn't be providing any more funds for Heta.
Under the new legislation, Austrian bank regulators halted payments
on more than EUR11 billion in bonds issued by Heta until May 2016
and said losses might be imposed on bondholders, which include many
European banks, insurers and pension funds.
Hypo Alpe Adria was a small lender that expanded into
southeastern Europe at a fast pace in the mid-2000s before it had
to be rescued by Austrian taxpayers. Austria still is struggling to
untangle the bank's finances, and its collapse is the subject of a
criminal investigation.
BayernLB has the largest exposure to Heta of any German bank.
Although BayernLB's credit lines aren't directly affected by the
moratorium on bond payments, executives have warned that BayernLB
will have to write down some of its exposure.
Madeleine Nissen contributed to this article.
Write to Ulrike Dauer at ulrike.dauer@wsj.com and Nicole Lundeen
at nicole.lundeen@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires