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Bankia Slumps After Spanish Recapitalization Wipes Out Investors

Bankia SA (BKIA), the Spanish lender that needed the biggest European bailout, slumped as much as 52 percent in Madrid after a recapitalization left its shareholders all but wiped out.

Bankia, which is Spain’s fourth-largest bank, slid 22 percent to 19.6 euro cents at 11:03 a.m., extending losses this year to 50 percent. The drop since July 2011, when the bank sold shares at 3.75 apiece in an initial public offering targeting its own clients, increased to 95 percent.

Spain’s bank rescue fund announced the terms of a 15.5 billion-euro recapitalization plan for the bank last week that cuts the nominal value of Bankia shares to 1 euro cent from 2 euros for a conversion of debt into shares. Bankia helped to trigger Spain’s request for European aid for its banking industry last year amid concern that mounting losses at the firm would contaminate the finances of the government.

“Current shareholders will be wiped out,” analysts including Juan Pablo Lopez at Espirito Santo Investment Bank said in an e-mailed report dated yesterday from Madrid. The two capital increases for the recapitalization imply growing the number of shares in Bankia to more than 1.2 trillion from 2 billion, they said.

Once the reduction in the value of Bankia shares is in place, the bank rescue fund, known as Frob, said it will group the shares in blocks of 100 to give them a nominal value of 1 euro each.

Bankia will then carry out two capital increases to convert 10.7 billion euros of so-called contingent convertible bonds and 4.8 billion euros of hybrid securities including preferred shares into shares.

Frob said the reference price for the capital increase after the reverse stock split will be 1 euro plus an issue premium.

The subscription price may be 1.27 euros per share, taking into account the 4.15 billion-euro negative equity value for Bankia set by Frob, Carlos Joaquim Peixoto, an analyst at Banco BPI SA (BPI) in Oporto, Portugal, said in a research note today.

To contact the reporter on this story: Charles Penty in Madrid at cpenty@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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