* Public debt guarantees in focus after Hypo Alpe Adria
* Moody's cites rising uncertainty about Austria's
(Adds comment from Bank Austria, market reaction)
VIENNA Feb 19 Ratings agency Moody's has
downgraded more debt of Austrian banks on concerns that the
government has not ruled out letting nationalised lender Hypo
Alpe Adria go bust.
"The main driver of these actions is the precedent set in
the case of Hypo Alpe-Adria-Bank International AG, in which
Moody's observes rising uncertainty about the intentions of the
bank's current owner, the Austrian government (Aaa negative),
with regards to the bank's future," the ratings agency said.
It noted that the policy debate about winding down Hypo -
which Austria took over in 2009 after a decade of breakneck
expansion - has not expressly excluded the possibility that
bondholders may not be fully protected despite statutory
"The debate signals that Austrian authorities more generally
are willing to countenance, even if not yet to favour, bank
resolutions which might greatly reduce the value of such a
deficiency guarantee to ensure full and timely payment of
interest and principal," it added late on Tuesday.
Moody's last week downgraded Hypo and its home province of
Carinthia for the same reasons.
Fitch is set to give its next sovereign ratings update on
Austria on Feb. 21, with Moody's announcement on Feb. 28.
Standard & Poor's said last week Austria's plan to set up a
state-run "bad bank" to absorb toxic assets from Hypo had no
immediate impact on its AA+ rating with a stable outlook.
In the latest action, Moody's cut ratings of the guaranteed
long-term senior unsecured and subordinated debt instruments of
Hypo Tirol Bank AG, Vorarlberger Landes- und
Hypothekenbank AG and UniCredit Bank
Austria AG that benefit from guarantees from individual Austrian
states or the city of Vienna.
"We do not expect a big impact. This is a relatively small
amount of old bonds," a Bank Austria spokesman said. The debt
was originally issued by a Vienna savings bank that Bank Austria
has since acquired.
Spreads on Austrian 10-year bonds over benchmark German
Bunds were little changed at around 28 basis points.
Moody's placed on review for downgrade the Prime-1
short-term guaranteed deposit ratings of Hypo Tirol Bank AG
while affirming the Prime-1 short-term guaranteed deposit
ratings of Vorarlberger Landes- und Hypothekenbank AG.
It also placed on review for downgrade the long-term Aaa
backed senior unsecured debt ratings of Pfandbriefstelle der
Oesterreichischen Landes-Hypothekenbanken (Pfandbriefstelle).
The rated debt obligations of Pfandbriefstelle are
guaranteed by its member banks - regional commercial and
mortgage banks - and those banks' guarantors, the respective
For the full text of the statement from Moody's Investors
Service, please click on link.reuters.com/mud96v.
(Reporting by Michael Shields; Editing by Ruth Pitchford)