"From the current point of view a cash position of 7.7 billion euros is to be expected at the end of the mid-term period in 2020, under the assumption of a wind-down of close to 80 percent of the portfolio (baseline 2014) by the end of 2018," Heta said in a statement on Thursday.

Heta is the state wind-down vehicle for failed lender Hypo Alpe Adria.

Austria's province of Carinthia has been in long-running negotiations with creditors including Commerzbank (>> Commerzbank AG) and Allianz (>> Allianz SE) to agree on a buy-back deal for bonds at a discount to the 11 billion euros in guarantees it made for them.

In May, shortly after the Austrian financial regulator imposed a big haircut on Heta bonds, Austria's government reached agreement in principle with creditors, paving the way for a bond buyback offer in early September.

Heta said its balance sheet had decreased 0.4 billion euros ($451 million) to 9.2 billion euros as of the end of June, as measured by Austrian accounting standards.

Profit after tax was 7.5 billion euros for the six months through June, mainly due to the haircut.

The financial watchdog cut the nominal value of the bulk of bonds by more than half, making Heta a test case for new European rules aimed at ensuring that a failed bank's losses are shared with creditors.

Operating income was at 0.3 billion euros for the January-June period, Heta said.

($1 = 0.8868 euro)

(Reporting by Kirsti Knolle; Editing by Edward Taylor)

Stocks treated in this article : Allianz SE, Commerzbank AG