April 23, 2015 / 11:06 AM / 5 years ago

Carinthia asks Vienna for financial support over Heta

VIENNA, April 23 (Reuters) - The home province of defunct lender Hypo Alpe Adria, Carinthia, is asking Vienna for financial support, saying it will run out of money by the beginning of June without external help.

Carinthia provided debt guarantees for years to fuel Hypo’s rapid expansion before the practice was stopped in 2007, but the last ones do not expire until around 2017.

With an annual budget of 2.2 billion euros ($2.36 billion), Carinthian officials have said the province cannot honour nearly 11 billion euros of backing for Hypo debt that creditors facing a “haircut” could demand.

Adding to the province’s woes, ratings agency Moody’s downgraded Carinthia last month to one notch above junk grade, making it more difficult to borrow in the open markets.

In the current financial year, Carinthia needs 340 million euros and is hoping for loans from the capital, a spokeswoman for the province said. Carinthian politicians are meeting Chancellor Werner Faymann and Finance Minister Hans Joerg Schelling in Vienna on Thursday.

The spokeswoman said Carinthia would run out of money in June without help, confirming local media reports. No Austrian province has ever gone bankrupt and there is no legislation on how to handle such an event.

It was unclear whether Carinthia would tap around half a billion euros from the sale of Hypo before its nationalisation in 2009 which is parked in a so-called “future fund”.

Austria is winding down what is left of Hypo, but regulators last month took control of the Heta “bad bank” managing this and imposed a debt repayment moratorium after an audit found writedown needs that blew a hole in its balance sheet.

$1 = 0.9323 euros Reporting by Angelika Gruber; Writing by Shadia Nasralla; Editing by Crispian Balmer

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