Spanish Bad Bank Risks Investor Conflict With Stressed Lenders

Spain must ensure a so-called bad bank meets investor demands for yield without undermining the balance sheets of lenders as the government seeks a panacea for the country’s real estate crisis.

“If the new investors do not believe they are going to get a good return on their investment, they will not want to get involved,” said Vanessa Gelado, director of Drago Capital, a Madrid-based real estate fund that’s considering investing in the bad bank. “It’s a very difficult equilibrium to achieve.”