UPDATE 1-Slovenia to pay banks for bad loans with short-term bonds
(Adds plans for bad loan transfer, bad bank operation)
LJUBLJANA Dec 16 (Reuters) - Slovenia's bailed-out banks will be paid for 4.5 billion euros ($6.2 billion) of bad loans with two and three year bonds that will allow them to access cash and fund new business, the head of the country's bad bank said on Monday.
Slovenia announced on Thursday that its banks would be paid about 1.6 billion euros for transferring their most troubled loans to the bad bank. Torbjörn Mansson, head of the bad bank, told journalists on Monday that banks would be paid with a combination of two and three year bonds.
"We are structuring the bond that it should be acceptable in the system, banks can use it to secure liquidity, fund new businesses," he said. Banks can pledge high quality bonds with the European Central Bank in exchange for cash, which they can then lend.
He said he expected the bonds would be priced "slightly over 5 percent" but could not provide more details.
Though the bad bank was scheduled to wind up in 2017, Mansson said it should extend its mandate, which will also include restructuring and investing in fallen companies, as Slovenia grapples with its worst economic crisis since becoming independent in 1991.
"I think we are talking about 10-15 years. We need more time in order for us to optimise the value, make orderly exits (from companies) over time, and I think it has been recognised by the government."
Slovenia's eight largest banks have to boost their capital by 4.8 billion euros as a result of long-awaited stress tests published last week. Slovenia said the money could be found without a sovereign bailout.
The two largest banks, NLB and Nova KBM , will transfer their bad loans by the end of December, Mansson said, and the first bond of 1.1 billion euros will be issued to them.
The third largest, Abanka, will not transfer its bad loans until 2014, since its restructuring plan is still awaiting approval from the EU.
Mansson said all transfers should be completed by the end of April.
In documents published on Monday, the bad bank said it would not be a long-term owner of non-performing loans and would sell them as soon as the assets were "interesting to the market".
However, the bad bank's asset manager, Janez Skrubej, said: "Investors should not get the impression we are under pressure to sell."
($1 = 0.7283 euros) (Writing by Laura Noonan; Editing by Louise Heavens and Mark Potter)
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