Bad Spanish bank to convert € 1.43 billion of subordinated debt into equity
MADRID, May 26 (Reuters) – Spain’s “bad bank” said on Wednesday that its shareholders had agreed to convert € 1.43 billion ($ 1.75 billion) of subordinated debt into equity to bolster its accounts, as sustained losses eroded its credit base. capital.
The institution, set up to take on bad debt following the 2012 financial crisis and known by its Spanish acronym Sareb, has been struggling since its inception as falling house prices have driven down the value of loans and assets.
Following the transaction, Sareb’s equity – after deduction of last year’s results – will amount to € 587 million in capital, he said in a statement.
In 2020, Sareb recorded a loss of 1.07 billion euros as its revenue fell 38% in a year marked by an economic contraction of 10.8% in Spain due to the COVID-19 pandemic.
When it was created, Sareb took over more than 50 billion euros in real estate and other toxic assets from nine savings banks. In exchange, he issued a debt taken out by the State for the same amount.
After selling 15.9 billion of all debt issued, Sareb still holds 35 billion euros in senior debt, which European authorities recently ordered Spain to record as public debt.
Spanish state rescue fund FROB has a 45.9% stake in Sareb, while the rest is mostly owned by banks, Santander SAN.MC being the largest private shareholder with a 22.2% stake.
As the pandemic puts additional pressure on Sareb, shareholders are working with the government to find a way to allow them to exit Sareb’s capital structure, two sources familiar with the matter said.
Sareb declined to comment.
Banks have made provisions to limit potential losses linked to their exposure to Sareb.
On Wednesday, Sareb’s board of directors also officially appointed Javier Garcia del Rio to succeed Jaime Echegoyen as new chairman.
(1 USD = 0.8181 euros)
(Report by Jesús Aguado. Editing by Andrei Khalip and Mark Potter)
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