Published February 26, 2013
MADRID – Four mid-sized Spanish banks are poised to transfer 14 billion euros ($18.30 billion) of soured property assets to a government-backed "bad bank", which on Tuesday issued bonds to give to the banks as payment and completed a capital hike.
The bad bank, known as Sareb, was launched at the end of 2012 as a condition of a 40-billion-euro European rescue of the country's ailing lenders.
It is designed to clean up Spain's banking system after a property crash five years ago, and has taken on tens of thousands of troubled loans to developers, plots of land and buildings in various stages of construction.
Sareb said it was issuing just over 14 billion euros of senior bonds - effectively government debt - which it will then give to the banks in exchange for their deeply-discounted assets.
The banks can use these as collateral to get funding from the European Central Bank.
Sareb also issued more subordinated debt, bought up by outside investors such as insurers Generali and Zurich , taking its capital to 4.8 billion euros so it can cope with a fresh intake of assets.
Just over half of Sareb's capital is in the hands of private investors - mainly healthier Spanish banks that are not transferring their assets to Sareb - to reduce the burden on public finances.
Four of Spain's weakest banks, including Bankia , which took the biggest chunk of the European aid, already transferred 37 billion euros of assets to Sareb at the end of December.
Four more banks are now set to dump more assets in Sareb on February 28, taking the bad bank's assets to between 50 and 55 billion euros.
Caja 3, which is in the process of being taken over by Ibercaja, said on Tuesday that it was transferring just over 2.2 billion euros of property assets to Sareb, while savings bank group CEISS said it would transfer assets worth 3.1 billion euros.
BMN, which will shortly be majority-owned by the state, revealed that the loans and properties it will transfer to Sareb total 5.8 billion euros.
Liberbank said it would transfer 2.9 billion euros of bad real estate assets. ($1 = 0.7649 euros)
(Reporting by Sarah White and Jesus Aguado; Editing by Helen Massy-Beresford and Jane Merriman)