Bloomberg News

Austria Hires Morgan Stanley to Sell Kommunalkredit

June 05, 2012

Austria has hired Morgan Stanley (MS:US) to sell nationalized Kommunalkredit Austria AG, a bank focused on municipal lending that has to be sold by the middle of next year under European Union rules.

“We have picked Morgan Stanley and commissioned them with working out the optimal privatization strategy,” Klaus Liebscher, the head of the agency that manages Austria’s nationalized banks and state aid, said in a telephone interview today. The agency, Finanzmarktbeteiligungs AG, had invited bids for the job in a public tender in February.

The hiring kicks off the sale of the first Austrian bank that was nationalized in 2008, when interbank lending froze after the collapse of Lehman Brothers Holdings Inc. The nationalization prevented a collapse of Kommunalkredit, which was owned by Oesterreichische Volksbanken AG (VBPS) and Dexia SA (DEXB) and faced a liquidity squeeze as it was wholesale funded.

Austria revamped the lender by spinning off “bad bank” KA Finanz AG, which took on the securities, loans and swaps that are not part of Kommunalkredit’s main business and is winding them down. Both Kommunalkredit and KA Finanz posted a loss last year because of Greek government debt and credit default swaps.

Kommunalkredit is changing its business model to become more profitable. Rather than just providing cheap loans to Austria’s towns and villages, it tries to earn more by offering more services such as consulting on the projects it helps finance. It was profitable again in the first quarter and will report a full-year profit, Chief Executive Officer Alois Steinbichler said May 2.

The EU ordered Austria to sell Kommunalkredit by June 2013 in its decision to approve the state aid.

Another nationalized Austrian bank, Hypo Alpe-Adria-Bank International AG, is selling its units in Austria, Italy and the former Yugoslavia in separate processes. Hypo Alpe has hired JPMorgan Chase & Co., Citigroup Inc. and Deutsche Bank AG, respectively, for those auctions.

To contact the reporter on this story: Boris Groendahl in Vienna at bgroendahl@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net


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