May 30 (Bloomberg) -- Banco Caja de Ahorros del Mediterraneo, a failed Spanish savings bank being taken over by Banco Sabadell SA, won European Union approval to receive restructuring aid.
The European Commission today approved a capital injection of 2.4 billion euros ($3 billion) from Spain’s bank-bailout facility and a 10-year government guarantee to cover the bank’s losses. The Brussels-based regulator said the guarantee was a state subsidy for the lender worth as much as 8.2 billion euros.
Sabadell agreed to buy Alicante-based CAM for one euro in December. CAM was seized by the Bank of Spain in July after souring property loans wrecked its business. Spain is trying to bolster its banks and help cash-strapped regions at a time of surging borrowing costs.
“The disappearance of Banco CAM from the market as an independent entity, the sale of its banking business to Banco Sabadell and the deep restructuring foreseen should ensure long-term viability without continued state support” the commission said in an e-mailed statement.
CAM will cancel a 3 billion-euro liquidity line that it received from the bailout facility before its sale to Sabadell becomes effective, the EU said. CAM also obtained EU permission to get as much as 700 million euros if it can’t benefit from deferred tax assets after the takeover.
Sabadell and CAM didn’t immediately respond to e-mails seeking comment on the EU decision. EU regulators must approve large state subsidies for banks and can impose conditions on the aid.
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