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Heta's Creditors Forced to Share Losses by Austria Regulator

Austria became the first European country to use a new law to share losses of a failed bank with senior creditors as it slashed the value of debt owed by Heta Asset Resolution AG.

The Austrian banking regulator cut Heta’s senior liabilities by 54 percent and extended the maturities of all eligible debt to Dec. 31, 2023, it said in a statement published on its website on Sunday, to help cover an 8 billion-euro ($9.1 billion) hole in Heta’s balance sheet. The Finanzmarktaufsicht took control of Heta last year in the first application of European Union rules designed to end taxpayer-funded bank rescues.

“While the application of the new European recovery and resolution framework for banks is uncharted territory in both legal and practical terms, we are on target with the resolution of Heta,” the FMA’s co-chiefs, Helmut Ettl and Klaus Kumpfmueller, said in the statement. “Orderly resolution is more advantageous than insolvency proceedings.”

The regulator also wiped out the company’s equity and junior liabilities as well as supplementary capital. Interest payments were canceled from March 1, 2015, when the FMA first put Heta into resolution.

Dealing with failing...