VIENNAAustria will sign a 1.2 billion
euro ($1.3 bln) final agreement with the German state of Bavaria
on Wednesday to settle their dispute over Austrian “bad bank”
Heta, Austria’s Finance Ministry said in a statement
on Tuesday.

BayernLB, 75 percent owned by Bavaria, bought a
majority in what was then Hypo Alpe Adria for 1.6 billion euros
in 2007, only to have it nationalised by Austria two years later
after a Balkan expansion spree went awry.

Heta is winding down the assets of now defunct Hypo, whose
failure sparked multiple lawsuits in Germany and Austria with
claims and counter-claims adding up to about 16 billion euros.

According to the statement, Bavaria’s Finance Minister
Markus Soeder will meet his Austrian counterpart Hans Joerg
Schelling in Vienna to sign the final settlement, for a sum
equivalent to 45 percent of Bavaria’s claims against Heta.

Last month, Austria’s parliament passed a bill paving the
way for the government to settle with the creditors of the
defunct Hypo Alpe Adria and remove a millstone from the
country’s public finances.

Aside from the settlement with Bavaria, Austria is preparing
an offer to Heta creditors for debt covered by 11 billion euros
in guarantees from Hypo’s home province of Carinthia.

The size of the offer that will be made to creditors, based
on the sale of Heta’s assets and a contribution from Carinthia,
has yet to be announced.
($1 = 0.9321 euros)

(Reporting by Karin Strohecker; Editing by Susan Fenton)