From Business Week:
Austria is facing a capital injection of as much as 1 billion euros ($1.3 billion) into KA Finanz AG less than two weeks after bailing out Oesterreichische Volksbanken AG. (VBPS)
The International Swaps & Derivatives Association yesterday ruled that Greece’s use of collective action clauses forcing investors to take losses under the nation’s debt restructuring will trigger default insurance payouts.
In a statement before ISDA’s decision, KA Finanz said it may have risk provisions of about 1 billion euros if credit- default swaps on Greece it has written are activated. That includes charges of 423.6 million euros on an assumed loss quota of 80 percent, it said.
KA Finanz is the so-called bad bank of Kommunalkredit Austria AG, which was nationalized in 2008 when it was owned by Volksbanken and Dexia SA. While Kommunalkredit continues as a municipal lender and has to be sold again by Austria by mid-2013, KA Finanz took on securities, loans and CDS that are not part of that main business and is winding down those assets.
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