Some of the world’s largest hedge funds and private equity groups have held talks with Spain’s troubled savings banks as they rush to secure €15 billion ($21.3 billion) in new capital to avoid a state bail-out.
Funds including Paulson & Co, the US hedge fund famed for its successful bet against subprime mortgages, and the buy-out groups Cerberus and Apax have held meetings in recent months with several Spanish savings banks to discuss possible investment.
“At the moment, Spain is crawling with hedge fund and private equity people,” said a senior executive at a large savings bank, which are known as cajas.
While Spain’s large listed banks have enjoyed shelter from the domestic downturn because of their large international operations, its privately held regional savings banks have been left desperatefor capital after loans made during the country’s property bubble started to sour.
The preliminary meetings with foreign investors, which were held by cajas including Bankia, Banca Civica and smaller rivals, are believed to have stalled after the banks balked at the low valuations offered by foreign investors, bankers and investors said.
This was followed by Moody’s, the credit rating agency, downgrading the senior debt and deposit ratings of 30 Spanish lendersfollowing its downgrade of the Spanish sovereign credit rating two weeks ago.
“It is, in Moody’s view, increasingly likely that the sovereign will not be prepared to write all banks a blank cheque, which is a key driver in Moody’s decision to reduce its support assumptions for Spanish banks to more normalized levels,” the rating agency said.
A nationally imposed deadline for the cajas to recapitalize or be forced to take state money, has triggered a rush to secure funds through selling shares in a stock market listing, or by attempting to attract other forms of private investment.
Alongside the meetings in Spain, the caja industry body earlier this month went on a tour of the Middle East to woo potential investors.
Bankia, Spain’s biggest bank in the domestic market, with assets of €328 billion and a market share of more than 10 percent, has hired advisers to raise €2-€3 billion in a Madrid stock market listing which is planned for the summer.
One large potential investor said: “We think [Bankia] needs much more money than they are trying to raise. Bankia still doesn’t have a CEO, and we have not seen the real numbers. They want €2-€3 billion, but they could need as much as €7 billion to be an attractive investment.”
Banco Bose, which had been exploring a public listing to raise funds, has now abandoned the idea and will accept partial nationalization by the Fund for Orderly Bank Restructuring, or FROB, according to people close to the lender.