Austria: Schoenherr leads successful offer to buy back HETA debt instruments

11 October 2016 | deal news

Schoenherr has advised the Republic of Austria's side on the successful buy-back offer of debt instruments issued by HETA ASSET RESOLUTION AG ("HETA"). In addition to the EUR 1.2 billion contribution by the Province of Carinthia, the funds for the buy-back will be provided by the Republic of Austria. In doing so, the Republic of Austria is pre-financing to a large extent the recovery from the HETA wind-down.

On Monday, 10 October 2016, the Kärntner Ausgleichszahlungs-Fonds ("K-AF") announced that the necessary majority of HETA creditors had accepted the offer pursuant to § 2a of the Austrian Financial Market Stability Act (FinStaG). The purpose of the offer was the buy-back of senior and subordinated debt instruments with a total nominal amount of EUR 10.80 billion guaranteed by the Province of Carinthia. The offer was created in order to facilitate an organised wind-down of HETA, to prevent a material disruption in the Austrian national economy, to preserve macroeconomic stability and to protect the Austrian national economy.

The offer was accepted by creditors holding 98.71 % of all guaranteed HETA debt instruments. More precisely, 99.55 % of creditors of senior HETA debt instruments and 89.42 % of creditors of subordinated HETA debt instruments have accepted the offer. The statutory acceptance thresholds of 25 % per class of debt instruments and 66.66 % in aggregate have thus been significantly exceeded.


The acceptance of the offer is the result of the Memorandum of Understanding ("MoU") concluded on 18 May 2016 between the Republic of Austria, represented by the Austrian Minister of Finance, and HETA creditors. By concluding the MoU, the Republic of Austria managed to get a significant number of HETA creditors to already accept the offer prior to the launch of the offer.

The offer documentation and exchange memorandum published on 6 September 2016 was addressed to all senior and subordinated creditors who hold debt instruments issued by HETA and were guaranteed by the Province of Carinthia. In relation to senior HETA debt instruments, creditors could, as compensation for tendering their instruments, choose to either participate in a cash offer of 75 % or exchange their HETA instruments for a medium-term zero coupon bonds issued by K-AF and guaranteed by the Republic of Austria. In relation to subordinated HETA debt instruments, creditors could chose to either participate in a cash offer of 30 % or exchange their HETA instruments at an exchange ratio of 2:1 for a medium-term zero coupon bond issued by K-AF and guaranteed by the Republic of Austria or exchange their HETA instruments for a long-term zero coupon assignable loan (Schuldscheindarlehen) from the Republic of Austria. Whereas the cash offer remained subject to essentially the same commercial terms as the first offer dated 21 January 2016, creditors could choose in the second offer to exchange their HETA debt instruments for either debt instruments of K-AF or the Republic of Austria.

Schoenherr's role

Schoenherr played a leading role in advising the Republic of Austria in connection with both the negotiation and implementation of the MoU. In particular, Schoenherr was responsible for structuring and negotiating the material underlying the transaction and financing agreements. Furthermore, Schoenherr led the re-drafting of the offer documentation and exchange memorandum to reflect the new complex transaction structure by splitting the cash offer into a combined cash and exchange offer.

"The overwhelming acceptance of the buy-back offer is a significant milestone in the coordinated resolution process of HETA," said Schoenherr partner Sascha Hödl, who together with Schoenherr partners Wolfgang Höller and Ursula Rath has been involved in the coordinated resolution of HETA initiated by the Republic of Austria early 2015.

The Schoenherr team was led by Sascha Hödl (partner, corporate/m&a), Ursula Rath (partner, banking & finance) and Wolfgang Höller (partner, banking & finance). The core Schoenherr team further consisted of Stefan Paulmayer (counsel, banking & finance), Miriam Simsa (attorney, banking & finance) and Thomas Kulnigg (partner, corporate/m&a). The core team was supported by Martin Ebner (partner, banking & finance).

Other advisors

The Republic of Austria as guarantor of the zero coupon bond of K-AF was advised by the Frankfurt office of Linklaters LLP. The Province of Carinthia was advised by Skadden, Arps, Slate, Meagher & Flom LLP (team led by Stephan Hutter) and as to Austrian law by attorney at law Norbert Abel and Hausmaninger Kletter Rechtsanwälte Gesellschaft m.b.H. The banks were internationally advised by Linklaters LLP (team lead by Peter Waltz) and as to Austrian law by CMS Reich-Rohrwig Hainz Rechtsanwälte GmbH.

Sascha Hödl


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