VIENNA, June 11 (Reuters) - Austria aims to wipe out holders of 890 million euros ($1.21 billion) in subordinated Hypo Alpe Adria debt guaranteed by the bank’s home province of Carinthia to ensure that investors - not just taxpayers - share wind-down costs for the lender, government sources said.
Draft legislation due to be approved by the cabinet on Wednesday also targets an 800 million euro contribution from BayernLB, the German landesbank from which Austria had to nationalise Hypo in 2009 to stave off a collapse, the officials said.
A 1 billion euro federal guarantee on Hypo subordinated debt will be honoured, they said.
“Bailing in” junior bondholders in ailing banks in Europe is not new, but imposing losses on holders of debt with an official guarantee breaks new ground that has ratings agencies worried about the reliability of state backing for debt in Austria.
$1 = 0.7345 Euros Reporting by Michael Shields, editing by LOUise Heavens