Raiffeisen Bank Pulls Exchange Offer

It was only a week ago that we were conjecturing about the prospects for Austrian mega-bank Raiffeisen. This being Zero Hedge of course, we came to the conclusion that the prospects were not that hot. Some readers vehemently disagreed. Maybe news today out of RZB will make them a tad less skeptical: the bank announced that it was scrapping the exchange offer without providing much of a reason.

Among some percolating speculations as to the reason why are:

1. Complete lack of investor interest
2. Concerns about what would happen once the lack of interest is made public
3. Trouble with accountants
4. rating agency getting back to the bank that this would be treated as a distressed exchange (as Zero Hedge speculated), putting the company into an Event of Default.

Then again, the real reason is probably much more innocuous, and has to do with the bank discovering a buried gold treasure in its back yard which will be used to satisfy the several hundred billion in toxic assets as a result of chicken coups built in Transylvania at a 180% LTV (in a JV possibly with GE Capital).

And in order to bring even more seriousness to this grave situation, I present Google's erudite translation of the German text provided by RZB to explain the exchange offer pull (about as legible as the 2930 line, non-broken sentence from the latest MGM Grand indenture).

RZB Finance (Jersey) IV Limited announces the withdrawal of the exchange offer the EUR 500,000,000 Non-cumulative Subordinated Perpetual Callable Step-up Fixed to Capital Floating Rate Notes (ISIN / Common Code XS0253262025/025326202) to RZB Finance (Jersey) Limited IV invited on 18 June 2009 to holders of the above.

Debt, the existing debt into new "Non-cumulative Subordinated Perpetual Callable Fixed to Floating Rate Capital Notes "to the issuer exchange offer (the" Exchange Offer "). The Exchange offer was based on the conditions of the Exchange Offer Memorandum of 18. June 2009. The new bonds were, as the existing Bonds, with a supporting statement of the Raiffeisen Zentralbank Österreich AG (RZB) equipped.

RZB Finance (Jersey) IV Ltd., the offerings of the investors who Debt exchange, which in the course of the exchange offer who has not accepted and the offer was withdrawn. This publication is in conjunction with the Exchange Offer Memorandum on read. The holders of the bonds is recommended that further details and information about the Exchange Offer Exchange Offer Memorandum on note.

In connection with the exchange offer were BNP Paribas and UBS Limited as Dealer Managers and Lucid Issuer Services as mandated Exchange Agent, RZB acted as co-dealer managers and Lucid Issuer Services Limited as Exchange Agent.

Any further questions please contact the Dealer Manager.

NOT FOR PUBLICATION OR DISTRIBUTION TO U.S. PERSONS OR IN THE UNITED STATES OF AMERICA OR IN ITALY.

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Is Raiffeisen Bank Bankrupt?

Zero Hedge discussed a few months ago the fact that the ratings agencies consider distressed exchange offers essentially equivalent to an event of default. If that is the case, then Raiffeisen Bank is basically bankrupt: one of Austria's biggest banks with massive Eastern European exposure has recently launched an exchange offer for €500 million of notes (ISIN: XS0253262025) at 55 cents on a dollar, to be exchanged into new notes yielding 15%!

Apparently RZB has not mastered the art of running equitizations, which the phenomenal brain trust of Larry Summers came up with as pertains to Citi and BofA to give the impression that all is good. Alas, with no interested buyers of financial company sub notes, underwriters BNP and UBS may have their work cut out for them. Also, RZB which was hoping to book a quick profit on the exchange of notes (in, ahem, exchange for a crippling interest rate down the line), may end up having to face its toxic asset demons and actually write down the value of its Romanian baking soda factories to FMV, i.e. 0 +/- 10. At this point anything they do will only delay by a few months the inevtiable collapse of the Austrian economy.

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