Austria's Schelling plays down talk of Heta debt buyback

VIENNA (Reuters) - Austrian Finance Minister Hans Joerg Schelling sought to dampen speculation that the province of Carinthia could buy back debt it had guaranteed for wind-down vehicle Heta to help relieve financial pressure on the hard-pressed region. Austrian media have reported that Carinthia, home province of defunct lender Hypo Alpe Adria, whose remnants Heta is winding down, could borrow money from the federal government for a debt buyback programme. Heta's debt trades at deep discounts to face value after the FMA watchdog took control of the undercapitalised entity and froze debt repayments while it works out a plan to share the pain among creditors. Carinthia, with an annual budget of around 2.2 billion euros (£1.5 billion), has made outstanding guarantees amounting to more than 10 billion euros on Heta debt. It has asked the federal government for help in talks to resume on Monday. In Riga for a meeting of euro zone officials, Schelling said he was surprised by reports of a potential debt buyback. "To be frank, I am rather amazed by the messages coming out of Carinthia. This has not been coordinated with me," the Austrian Press Agency quoted him as saying on Saturday. "What everyone is overlooking is that we have no leeway to act at all," he added, noting that only the FMA could decide. Just how big a haircut creditors face is unclear. Heta said on Friday it would not be able to report 2014 results this month as planned and pushed the date back to late May after the extent of asset writedowns becomes clear. Schelling said the point was to get Heta debt off the market but that he had no influence on this issue. "Only Carinthia can act. I would suggest not acting in an isolated way but rather by ... seeing to arranging a negotiating team." In 2009 Austria nationalised Hypo after a decade of breakneck expansion pushed the bank to the edge of collapse. It decided last year to wind down the parts it could not sell. Hypo has absorbed 5.5 billion euros in state aid and added to Austria's debt and budget deficits in its biggest post-war financial scandal. Profil magazine cited former FMA co-head Heinrich Traumueller as saying his appeals to crack down on Hypo went unheeded and that the government instead tried to have him sacked in 2006 for seeking to remove Hypo's chief executive at the time. He said he had repeatedly warned Hypo executives about problem lending, especially in Croatia. "I told the gentlemen many times: if something happens there, I will rip your heads off. We at FMA were of the opinion that they were well on the way to drive the bank into the wall. I told this to government leaders from the chancellor on down." (Reporting by Michael Shields; editing by Jane Baird)