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Multiple Austrian and International Firms Involved in Successful HETA Buy-Back

Multiple Austrian and International Firms Involved in Successful HETA Buy-Back

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At least eight Austrian, German, and international firms have played significant roles in advising various parties to the Republic of Austria's successful buy-back offer of debt instruments issued by Heta Asset Resolution AG ("HETA").

Schoenherr advised the Republic of Austria on the successful buy-back offer and on its provision of funds for the buy back, made along with the EUR 1.2 billion contribution by the Province of Carinthia. The Frankfurt office of Linklaters advised the Republic of Austria as guarantor of the zero coupon bond of Karntner Ausgleichszahlungs-Fonds (K-AF). The Province of Carinthia, Karntner Landesholding, the Sondervermogen Karnten fund, Karntner Beteiligungsverwaltung, and K-AF were advised as to Austrian law by Hausmaninger Kletter Rechtsanwalte and Abel Rechtsanwalte. Skadden Arps and Hausmaninger Kletter also managed the capital market process on the Carinthian side and the launch of the offers by K-AF. 

The two participating international investment banks were internationally advised by Linklaters and on matters of Austrian law by CMS. In addition, Dorda acted as Austrian Counsel to a large group of HETA creditors in enforcing their claims, while the creditors (banks, insurance companies, asset management firms and public institutions) organized in the so-called "par investor pool" were also advised by a team from Germany’s GORG law firm.

Details of the Deal

According to Schoenherr, on Monday, October 10, 2016, 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 organized 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 — 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 May 18, 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 accept the offer prior to its launch. The offer documentation and exchange memorandum published on September 6, 2016 was addressed to all senior and subordinated creditors holding debt instruments issued by HETA and 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 January 21, 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.  

The Firms and Attorneys Who Made it Happen

Schoenherr reports that it "played a leading role in advising the Republic of Austria in connection with both the negotiation and implementation of the MoU." In particular, the firm reports, it "was responsible for structuring and negotiating the material underlying the transaction and financing agreements," and that it "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 Hodl, who led the firm’s team along with Partners Ursula Rath and Wolfgang Holler. The Schoenherr team also included Counsel Stefan Paulmayer, Attorney Miriam Simsa, and Partners Thomas Kulnigg and Martin Ebner. 

Frankfurt-based Linklaters Partner Peter Waltz led the firm’s team providing advice to the two participating international banks.

The core CMS team was led by Capital Markets Partner Martin Zuffer, who described the transaction — which the firm called the largest capital markets transaction ever in Austria — as "extremely complex, as it had a volume of more than EUR 11 billion in nominal value and involved more than 200 debt instruments.” The CMS team also included Partners Daniela Karollus-Bruner, Sibylle Novak, and Robert Keisler, and Attorney Phillip Mark.

The Dorda team was led by Partners Andreas Zahradnik and Bernhard Muller and included Senior Associates Christoph Hilkesberger and Stephan Steinhofer and Associate Christian Kruger-Scholler. 

The GORG team was headed by Roland Hoffmann-Theinert.

The Hausmaninger Kletter team included Partners Mark Kletter and Manfred Ketzer and Associate Barbara Remp. The Abel Rechtsanwalte team consisted of Partner Norbert Abel and Associate Patrick Gensbichler.