Spain Values Bankia Shares at 1 Euro-Cent as Debt Swap Looms

Spain cut the nominal value of Bankia SA shares to 1 euro-cent from 2 euros in a debt swap that will practically wipe out existing stockholders in the nationalized lender.

The holding company BFA will own about 70 percent of Bankia following a 15.5 billion-euro ($20.1 billion) recapitalization approved by the Frob rescue fund today, an official from the fund said at a briefing in Madrid. Investors who bought subordinated debt or preferred shares will end up with about 30 percent of the bank’s stock.

Spain’s bank rescue fund fixed the price as the basis for converting 4.8 billion euros of hybrid securities including preferred shares and 10.7 billion euros of so-called contingent convertible bonds into stock as part of a 15.5 billion-euro recapitalization of the lender, the fund, known as Frob, said in an e-mailed statement today. Bankia has about 2 billion outstanding shares, which closed today at 25 euro cents.

The Bankia group helped to trigger Spain’s request last year for European aid for its banking system amid concern that mounting losses at Spain’s fourth-biggest lender would contaminate the finances of the government.

The group, which took about 18 billion euros in bailout aid, is now targeting earnings of 1.2 billion euros in 2015 after moving 22.3 billion euros of real-estate linked assets to a bad bank.

Catalunya Banc

Catalunya Banc’s preferred shareholders face an average 61 percent haircut while perpetual subordinated debt holders face a 40 percent haircut. NCG Banco preferred shareholders’ haircut will be 43 percent on average and owners of perpetual bonds will lose 41 percent.

The 1 euro-cent valuation for Bankia is in line with the negative valuation of 4.15 billion euros that Frob had given the bank, the fund said. Once the reduction in the value of Bankia shares is in place, Frob plans to group the shares in blocks of 100 to give them a nominal value of 1 euros, Frob said.

The first stage in the recapitalization will be a capital increase of 10.7 billion euros subscribed to by Frob via Bankia’s parent BFA, which it wholly owns.

The haircut for the holders of Bankia preferred shares will be 38 percent and 36 percent for holders of perpetual subordinated debt, Frob said.

(updates with details on other rescued banks in fifth paragraph. See TOP CRIS for more on Europe’s debt crisis.)
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