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Vienna, 18.05.2016 Key terms of the Memorandum of Understanding between HETA Creditors and the Federation Finance Minister executes Memorandum of Understanding, authorization was obtained from the Council of Ministers (Ministerrat) in advance

The Federation and a significant number of HETA Creditors (as defined below) of debt instruments of HETA ASSET RESOLUTION AG for which a default guarantee is foreseen by regional law (“HETA Debt Instruments”), have signed a Memorandum of Understanding (“MoU”) through which the parties confirm their common intention to amicably settle the restructuring of the HETA Debt Instruments.

It is intended that the Kärntner Ausgleichszahlungsfonds (“K-AF”) will submit a new public offer which, as in January 2016, will be based on § 2a FinStaG. The province of Carinthia will contribute an amount of
EUR 1.2 billion. The remaining funds are to be provided to the KAF by the Federation which will thereby pre-finance to a large extent the recovery from the HETA resolution.

72 HETA creditors which represent a total amount of HETA Debt Instruments of EUR 4,938,450,000 have executed the MoU ("HETA Creditors"). This includes senior creditors holding a nominal amount of
EUR 4,828,550,000 representing 48.7% of HETA Debt Instruments held by senior creditors. In addition, this includes subordinate creditors holding a total nominal amount of EUR 109,900,000; this represents 12.3% of HETA Debt Instruments held by subordinated creditors.

According to the MoU these creditors represent sufficient majorities in order to terminate or amend the so-called "lock-up" agreements entered into by these creditors to enable the acceptance of the offer. The Federation is confident that this paves the way for acceptance of the offer by the requisite statutory majorities (two-thirds majority of the total amount of HETA Debt Instruments plus consent by a quarter of each of the senior and subordinate creditors).

As consideration the creditors will receive, as previously, a cash payment of 75% for senior HETA Debt Instruments and 30% for subordinate HETA Debt Instruments. Alternatively, the creditors will be offered a zero coupon bond of the KAF with a term of about 13.5 years, in respect of which creditors will be allowed to subscribe in a ratio (nominal amount of HETA debt as of 1 March 2015 including interest accrued until then : nominal amount of the zero coupon bond) of 1:1 the zero coupon bond, and subordinate creditors in a ratio of 2:1. As an alternative for very long-term oriented subordinate creditors a term of 54 years will be offered. The zero coupon bond of the KAF will be backed by a guarantee of the Federation. In addition, there will be a stabilization of the zero coupon bond after the expiry of a holding period during the term of 180 days.

There are of course some material steps still to be implemented before the offer by the KAF can be made. For example, before beginning of the offer a sufficient number of binding support undertakings must be entered into and certain statutory requirements will need to be implemented. Further, the EU Commission will have to have completed its examination of the offer for state aid. The tender offer is expected to be published as of the beginning of September 2016 with completion expected in mid October 2016.

The key terms of the envisaged zero coupon bond: "Excerpt of the term sheet for the zero coupon bearer bonds".