Hypo Alpe Adria sets Friday EGM for more aid

VIENNA Tue Dec 10, 2013 12:56pm EST

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VIENNA Dec 10 (Reuters) - Nationalised Austrian lender Hypo Alpe Adria will hold a shareholders' meeting on Friday to approve the extra 800 million-euro ($1 billion) infusion of aid it needs this year to avoid breaching minimum capital levels, it said on Tuesday.

The bank that Austria took over in 2009 to avoid a collapse with regional implications said last month it required 1.05 billion euros in extra state aid this year. It got a 250 million euro cash injection a week later.

That left 800 million to be raised in the form of non-voting participation capital the state will subscribe after it authorises the move as the bank's lone shareholder.

The state will thus have pumped nearly 5 billion euros in aid into the bank, including 700 million forced by writedowns on assets in the first half.

Hypo's chronic need for capital threatens the country's drive to cut debt and deficits and balance the budget by 2016.

It is also a major headache for Austria's two big parties, which are close to clinching a coalition accord after stumbling to their worst showing since World War Two in September elections.

The parties have agreed to earmark 5.8 billion euros in aid for struggling banks over the next five years, but have yet to adopt a long-term strategy for handling Hypo.

Austria's central bank in September denied a newspaper report that Hypo, which is selling or winding down non-core assets, could need as much as 17 billion euros more aid.

Austria said in September Hypo's sell-off could cost taxpayers up to 5.4 billion euros more by 2017 under a revamp package agreed with the European Commission.

Austria has ruled out letting Hypo go bust, a step which would trigger an unaffordable 14 billion euros in debt guarantees by its home province of Carinthia.

Top officials have also refused to entertain the notion of seeking a debt haircut on Carinthia-guaranteed bonds, a measure which Hypo Chairman Klaus Liebscher said would ruin Austria's reputation as a borrower. ($1 = 0.7261 euros) (Reporting by Michael Shields; editing by David Evans)

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