Spain targets London investors for "bad bank"

Wed Oct 3, 2012 11:30am EDT
 
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By Jesús Aguado and Sonya Dowsett

MADRID (Reuters) - Spain's Economy Minister will meet investors in London on Thursday in the hope of tempting them to buy into a 'bad bank' that will house billions of euros of the country's soured real estate assets.

Madrid hopes the newly formed asset management company will help unblock the credit flows to businesses and families that have been progressively choked off as the country's economic crisis has worsened.

Its creation is also a condition of Spain receiving up to 100 billion euros ($129 billion) in European aid to patch up its creaking banking system, overexposed to a housing boom that crashed in 2008.

Spain expects private investment to finance more than half the heavily written-down assets - including foreclosed property and bad loans - that lenders will transfer into the entity, which is expected to be in operation by early December.

The state wants to limit its ownership to under 50 percent, to avoid an impact on public debt. The government expects private investors to own at least 55 percent of the 'bad bank', Economy Minister Luis de Guindos said in a speech to parliament.

The assets to be transferred would be priced "very conservatively", and details would be given in coming days, he added.

Spain's banks will need almost 60 billion euros in extra capital to ride out an extreme economic downturn, an independent report concluded on Friday.

They will transfer foreclosed property and bad loans to housing developers to the bad bank and receive state-backed bonds in return which can be used as collateral with the European Central Bank to get cash.   Continued...