MADRID – Spain's economy minister made no direct plea for investment in the country's new "bad bank" setup during face to face meetings in London with leading funds on Thursday but updated them on Spain's progress
A source attending one of the sessions said the meeting with Minister Luis de Guindos was a "low key event" where much of the focus was on what Spain was doing with its economy and banks and the issue of whether it would apply for an EU bailout.
Spain is seeking foreign investment in the "bad bank" that it is setting up to meet the conditions of a program of up to 100 billion euros in aid for its troubled financial sector.
The so-called bad bank is an asset management company that will take on soured property assets from Spanish banks that were left with 184 billion euros in bad loans and repossessed property after a building bubble burst in 2007.
But de Guindos did not actively pitch the asset management company.
"There's nothing there that's really new. The thing that is on their mind is to apply for the ESM (European Stability Mechanism) assistance and the implications for that," said the source who was in one of the meetings with the minister.
With the banking rescue under way, Madrid is now under pressure to apply for aid for the sovereign from the European rescue fund to trigger action from the European Central Bank, which will buy its bonds to bring down its borrowing costs.
The Spanish state wants to own less than half of the asset management company, or bad bank, to keep its performance from weighing on public accounts.
Investors are still waiting to see whether assets that are transferred to the bad bank are priced low enough to guarantee juicy returns. Spanish property prices are expected to continue to fall at least through 2015.
"He has studied the Irish case. Execution is important," said the source. Ireland's asset management company became profitable in its second year after being set up.
"The key thing is going to be the transfer price of the assets," the source told Reuters.
(Writing by Chris Vellacott; Editing by Fiona Ortiz)