Portugal state loan for BES rescue bears incremental rate - finance minister

LISBON Mon Aug 4, 2014 4:56pm EDT

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LISBON Aug 4 (Reuters) - A Portuguese state loan worth 4.4 billion euros to rescue the country's second largest listed bank carries an incremental interest rate to encourage its repayment before the maximum maturity of two years, the finance minister said on Monday.

Maria Luis Albuquerque told SIC television the loan to the autonomous bank resolution fund, which in its turn recapitalised the "good bank" split from Banco Espirito Santo, should have no impact on Portugal's ability to reach its budget deficit goal of 4 percent of national output this year.

The initial interest rate on the loan, which comes from Portugal's bailout line, would be the average cost of debt under the rescue - 2.8 percent plus 15 basis points for the first three months. It is extendable each three months for a total of up to two years.

"For every three months that the loan is renewed there is an additional increase of 5 basis points, which is understood as an incentive for a swifter repayment," she said.

The rescue plan for Banco Espirito Santo, unveiled late on Sunday, involved splitting it into a "good bank", renamed Novo Banco, and a "bad bank", which will house BES's exposures to the troubled business empire of its founding Espirito Santo family as well as its Angolan subsidiary.

The total size of the recapitalisation of Novo Banco via the bank resolution fund, set up by the Portuguese authorities in 2012, is 4.9 billion euros. The state agreed to lend the fund 4.4 billion euros. Novo Banco will later be sold off to investors to reimburse the fund and the state.

Before that sale, banks that contribute to the resolution fund may instead choose to repay the state and provide their own loans to the fund, Albuquerque said.

The rate is below that applied on state loans to banks extended in 2012 at the height of the country's debt crisis because those were convertible into banks' shares and the state had to assume the risk.

"In this case there is no risk. We just need to guarantee that taxpayers are not harmed, that the money is paid back soon, so if it takes longer there is a penalty charge."

Portugal emerged from a 78 billion euros, three-year bailout financed by the European Union (EU) and the International Monetary Fund (IMF) in May, but it had 6.4 billion euros left over from a bailout line earmarked to aid the country's banks. (Reporting By Andrei Khalip; Editing by Gareth Jones)