Bankia Said to Propose Preferreds Redemption Close to Face Value
Spain’s Bankia group is proposing to offer holders of 3 billion euros ($3.6 billion) of its preferred shares most of their money back, though not for years to come, according to a person with knowledge of the matter.
The preferred shares are loss-absorbing notes whose holders must, under European Union rules, share the burden of rescuing cash-strapped lenders to reduce taxpayers’ contribution to the 100 billion-euro bailout of Spain’s banking system. Forcing losses on the investors is politically sensitive because most of them were retail clients of the troubled savings banks merged into Bankia group in December 2010.
Under the plan, the preferred shareholders would receive new securities with a lower yield plus a cash, share or other payment in future years, said the person, who asked not to be identified because the talks are private. Together, the deal is equal to most of the notes’ face value, though spreading the payments over time reduces their worth while helping Bankia (BKIA) group to comply with EU rules limiting payments by rescued banks, the person said.
A spokesman for Bankia group, who asked not to be identified citing the lender’s policy, declined to comment.
Bankia group proposed the compromise to the European Commission, which will now negotiate how investors are repaid with the government and central bank, the person said.
How much investors get will depend on where the preferred shares are currently valued. That’s because EU banks rescued using taxpayer cash can’t repay preferred shares or other junior debt at more than 10 percent higher than where they’re trading.
Bankia’s preferreds, which were issued by the Caja Madrid savings bank in 2009, last traded at 45 percent of face value on July 11, according to the Bolsas y Mercados Espanoles SA stock exchange. Most of the preferred shares of other lenders merged into Banco Financiero y de Ahorros SA, or Bankia group, have already been redeemed or swapped into new notes.
To contact the reporter on this story: Esteban Duarte in Madrid at
[email protected]
