KKR & Co. would be interested in investing in pools of loans from Spanish banks as the government explores ways to relieve the debt burden of distressed companies, two people with knowledge of the matter said.
KKR is studying how to apply new rules that may allow banks to shift loans from their balance sheets into funds open to investors such as private-equity firms, said the people, who asked not to be identified because the matter is private. KKR, run by billionaires Henry Kravis and George Roberts, has held talks with Spanish banks about the issue, the people said.
The government, encouraged by the International Monetary Fund and the Bank of Spain, has been seeking ways to help companies that are viable but are burdened by excessive debt, to free them to contribute to the country’s recovery. At the end of last year, refinanced or restructured loans in Spain amounted to more than 210 billion euros ($284 billion), or 15 percent of private-sector lending, according to the Bank of Spain. About half of the loans were classed as non-performing.
Spain revised its bankruptcy laws in March to make it easier for troubled companies to avoid liquidation by restructuring their debts. KKR, based in New York, opened an office in Madrid in February.
“The economic authorities have made a clear bid to promote the refinancing and restructuring of corporate debt,” Mariano Herrera, the Bank of Spain’s supervision director, said in a speech in Madrid today. Banks and other creditors need to “make an effort to achieve a realistic identification of those companies that, despite their high indebtedness, continue to be productive.”
KKR has held talks with Spanish lenders to group together loans of five or six companies that are struggling to operate under the terms of their current financing, one of the people said. KKR could then apply so-called haircuts to the debt, restructure the loans and add capital to the companies to make them viable again. Under such a deal, banks could account for the debt in a way that doesn’t damage their balance sheets, the person said.
An external KKR spokesman in Madrid, who asked not be identified, declined to comment. A spokesman for the Bank of Spain referred questions to a spokesman for the Ministry of Economy, who declined to comment.
In April, KKR and Alvarez & Marsal agreed to hold discussions with Italian lenders Intesa Sanpaolo SpA and Unicredit SpA about managing some of the banks’ loans.
Spanish companies have been under pressure to cut costs and jobs since the start of the crisis, according to a May 27 report by the IMF.
“The necessary process of reducing firms’ debt could help growth and job creation if more of it were to come from creditors restructuring the excessive debt of operationally viable firms,” the IMF said in the report.
Spain created a bad bank for real estate-related assets in 2012 to help lenders sell their toxic property assets, one of the conditions for a 41 billion-euro bailout by the European Union.