DEAL: Heta Asset Resolution

Author: Lizzie Meager | Published: 21 Oct 2016

The EU’s new rules for winding down banks, contained in the Bank Resolution and Recovery Directive (BRRD), have now been put to the test by Austrian 'bad bank’ Heta Asset Resolution.

Heta was established in November 2014 after troubled Austrian lender Hypo Alpe Adria collapsed in 2013. It went on to face difficulties after rapidly expanding into central and eastern Europe before the financial crisis hit, operating under guarantees issued by the Austrian province of Carinthia.

This is the first time in Europe that an AAA-rated country has undergone both a debt reduction process and the bondholders in one of its sub-sovereign entities have received any less than 100% in return.

If found liable, the province of Carinthia would have been the first to go insolventThe deal struck with the senior bondholders, which took a number of months, is a package comprised of a cash liability contribution from the...