July 14, 2015 / 10:24 AM / 2 years ago

Austria sees ruling on Heta debt law within weeks

VIENNA, July 14 (Reuters) - Austria's finance minister expects the country's constitutional court to decide within weeks whether a new law that wiped out claims of subordinated debt holders of failed Austrian lender Hypo Alpe Adria was legal.

"I think the (constitutional court's) session has already discussed the issue but they did not inform us yet," Austrian finance minister Hans Joerg Schelling told Reuters on Tuesday.

Originally, a decision had been scheduled for September, he said, but now he expected a ruling "within the next weeks".

Hypo Alpe Adria was nationalised by Austria in 2009 after it became apparent that a headlong expansion into Balkan and other frontier markets had been over-ambitious. It had been bought by Bavarian state bank BayernLB two years earlier.

Nearly 1.6 billion euros ($1.8 billion) worth of junior debt issued by Hypo and guaranteed by Carinthia was wiped out by a special law that Austria passed last year, enraging investors who thought they had iron-clad state guarantees.

Austrian newspaper Der Standard said last week the constitutional court was set to overturn part of the law.

The junior debt holders include Austrian insurers Uniqa and Vienna Insurance as well as the World Bank and German funds.

Hypo Alpe Adria's assets were transferred into "bad bank" Heta last year to be wound down.

The judgement is seen as a key test case for attempts to finance bank rescues via creditors instead of taxpayers, which has been made possible thanks to the EU European Bank Recovery and Resolution Directive.

$1 = 0.9079 euros Reporting by Kirsti Knolle; Editing by Mark Potter

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