* Vienna to start talks with BayernLB - finance minister
* Task force report says Austria cannot bail in bondholders
* Solution proposed by task force may swell state deficit
(Adds Hypo statement on potential capital need)
By Angelika Gruber and Michael Shields
VIENNA, March 10 Nationalised Austrian lender
Hypo Alpe Adria may need more state aid quickly to
close out its 2013 accounts and meet minimum capital standards,
the bank said on Monday, creating another headache for the
More than four years after being forced to take over the
bank to avoid a collapse with regional repercussions, Austria is
finally trying to wind the lender down, but has yet to agree on
the best way to do so.
Hypo has angered taxpayers by requiring 4.8 billion euros
($6.6 billion) in state support since 2008, including 1.75
billion that was supposed to ensure it could close the 2013
Now it does not rule out needing more help to meet minimum
capital requirements and show it is a going concern.
The bank was not specific, saying only that talks with the
government were under way.
"We have no clear picture at the moment, but we are not
talking about 100 million (euros). We are talking about more, a
lot more," one source familiar with the discussions said.
"This has been the problem with the bank for many, many
years. Whenever they say: 'That's it at the moment,' it turns
out at the end of the day it's not," he added, calling the
situation "a real nightmare".
Another source confirmed that Hypo needed more than 100
million to help cover losses in the first quarter of 2014. A
commitment of more aid was needed to allow Hypo to repay a bond
coming due at mid-month, this source said.
The sources said Hypo's auditors were not satisfied with
some of its asset valuations, requiring more markdowns.
Austria had pencilled in 1 billion euros in Hypo aid this
year - before it knew that more money might be needed for 2013 -
part of 5.8 billion it has earmarked for aid to ailing banks
over the next five years.
A restructuring deal agreed with the European Commision last
year allows Austria to provide Hypo with 5.4 billion euros in
capital by 2017, of which 3.65 billion remains available.
But the bank's chronic need for aid is straining state
finances and prompting howls of protest from opposition parties.
DECISION THIS MONTH
An advisory task force led by National Bank Governor Ewald
Nowotny has recommended hiving off 17.8 billion euros of assets
into a wind-down unit, boosting state debt to 80 percent of
economic output and raising this year's budget deficit by as
much as 1.2 percentage points.
Finance Minister Michael Spindelegger told reporters he
"took note" that the task force had ruled out having Hypo
bondholders share the costs.
He said Vienna would start negotiations with former Hypo
owner BayernLB - which can veto the latest wind-down
plan - on sharing the burden. He repeated that Austria would
decide this month how to proceed.
BayernLB had no comment. The German bank kept a say in major
strategic decisions at Hypo under the 2009 bailout terms.
Spindelegger is also using outside consultants, including
former Morgan Stanley banker Dirk Notheis, on other potential
options, including letting Hypo go bust, a step Nowotny has
A split now seems to be emerging between Spindelegger's
conservative People's Party and their senior partners in
government, Chancellor Werner Faymann's Social Democrats.
Josef Ostermayer, a top Faymann aide who is now chancellery
minister, said on Sunday, "The recommendations of the task force
must be implemented quickly."
Both blame the former government in Hypo's home province of
Carinthia for providing excessively generous debt guarantees to
the bank, which led Austria to nationalise Hypo in 2009.
Carinthia still guarantees around 12.4 billion euros of Hypo
($1 = 0.7214 euros)
(Editing by Larry King and Tom Pfeiffer)