Bloomberg News

KA Finanz May Get 1 Billion Euros From Austria on Greece CDS

March 03, 2012

KA Finanz AG, the “bad bank” of nationalized Austrian lender Kommunalkredit Austria AG, may get an injection of 1 billion euros ($1.3 billion) of government funds should credit default swaps kick in because of a Greek default, according to Finance Minister Maria Fekter.

Should Greece be considered in default, CDS would be triggered and KA Finanz would need about 1 billion euros, Fekter said in an interview in Austrian state radio ORF today, adding that the government has made “provisions for 600 million euros, the remaining 400 million euros are to be seen as a risk.”

Kommunalkredit, then owned by Oesterreichische Volksbanken AG (VBPS) and Dexia SA, was nationalized in October 2008 to avoid a collapse when liquidity dried up. It was split into Kommunalkredit, which continued as municipal lender, and KA Finanz, a “bad bank” that took on securities, loans and credit default swaps that are not part of that main business and is winding down those assets. Austria plans to sell Kommunalkredit by the middle of 2013, it said in November.

Hypo Alpe-Adria-Bank International AG, which also was nationalized, may also require additional state funds should its capital base fall under legal requirements as a consequence of a failure to “offload” risky assets, Fekter said.

About 4 billion euros remain in Austria’s bank-bailout fund and that will be enough, the finance minister said in the interview.

Austria this week also agreed to partially nationalize Volksbanken.

To contact the editor responsible for this story: Zoe Schneeweiss at zschneeweiss@bloomberg.net


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