Ratings agency Moody's has downgraded Austria's Carinthia province to Baa3 - one notch above junk grade - over its exposure to the "bad bank" Heta handling assets of defunct lender Hypo Alpe Adria. Austria's financial watchdog the FMA took control of Heta on Sunday and halted payments on more than 11 billion euros ($12 billion) worth of debt, after the government refused to plug a capital hole of up to 7.6 billion euros revealed in an audit.
"Carinthia provides a statutory deficiency guarantee on a very high portion of Heta's senior debt; the total guarantees are equivalent to nearly 10.2 billion euros, or nearly five times the state's 2014 operating revenue," Moody's said late on Friday.