* Bankia junior debt holders loss seen at 10 pct to 50 pct
* Massive job cuts expected at four nationalized lenders
* Bank of Spain approves recap plans of four banks
* European Commission to rule on plans on Wednesday
* La Caixa to buy nationalized Banco de Valencia for 1 euro
(Adds confirmation of La Caixa purchase of nationalized bank)
By Carlos Ruano
MADRID, Nov 27 Junior debt holders in Spain's
Bankia could lose as little as 10 percent of the face
value of their investment as a condition for the nationalized
lender to receive European aid, a source involved in the talks
The likely loss will range from 10 percent to around 50
percent, a level that Reuters reported last week.
Many junior debt holders, who rank behind other creditors in
Spain's state-rescued lenders, are retail clients who entrusted
their life savings to the banks, making any loss they suffer as
part of the bailout a hot political issue.
State-owned banks are negotiating with the European Union
to receive funds from a 100 billion euro ($127 billion) credit
line as part of an international bailout.
Economy Minister Luis de Guindos said on Monday the
government would tap just around 40 billion euros of the
European credit line, with the rescued banks accounting for the
vast majority of that.
Enforced losses on junior bondholders will form part of
recapitalisation plans put forward by the rescued banks -
Bankia, NovaCaixaGalicia, Catalunya Banc and Banco de Valencia -
as a condition of receiving the EU aid, alongside job cuts.
The Bank of Spain said on Tuesday it had approved the plans
of the state-owned banks, without giving any details of what the
measures entailed. It said it expected the European Commission
to give its definitive approval of the plans on Wednesday.
The source with knowledge of the Bankia talks said
subordinated debt with fixed maturities was set to lose 10 to 20
percent of its face value, with a discount of 40 to 50 percent
applied to perpetual subordinated debt and preference shares.
"A deal has been clinched on swapping these
(debt)instruments with Bankia shares and the discount applied
will depend on the instruments," the source said on condition of
The source warned that last-minute talks could still change
Bankia, which sought a 23.5 billion euro bailout from the
state in May, declined to comment.
Bankia shares closed up almost 5 percent ahead of the
expected approval of its plan. The lender has lost over half its
value since it was taken over by the state in May.
The stock market regulator estimates retail customers
account for almost all of the 5.5 billion euros in preference
shares in circulation. Bankia accounts for over half of these.
Nationalized banks are bracing for thousands of job losses
as a condition of receiving aid, with Bankia and
NovaCaixaGalicia expected to cut up to a third of their
workforce. Both banks declined to comment.
Catalunya Banc and Banco de Valencia were put back on the
block by the country's bank restructuring fund this month.
Spain's third biggest bank La Caixa will buy Banco
de Valencia for the nominal fee of 1 euro it was confirmed on
Tuesday. The deal will see the country's bank restructuring fund
pump 4.5 billion euros into the damaged nationalized bank.
The FROB will also assume up to 72.5 percent of losses on
certain assets over a ten-year period in Banco de Valencia.
($1 = 0.7871 euro)
(Additional reporting by Nigel Davies; Writing by Sonya
Dowsett; Editing by Erica Billingham, Hans-Juergen Peters and