* Bankia sells 12 pct IAG stake to investors at 3 pct
* Sale raises 675 mln euros, capital gain 167 mln euros
* Spain loses IAG board seat in midst of Iberia
* Stake sale part of Bankia's recovery plan
By Clare Kane and Tracy Rucinski
MADRID, June 27 Spain has lost its direct
influence in International Airlines Group in the midst
of its controversial restructuring, after nationalised lender
Bankia sold its stake in the airline company for 675
million euros ($877 million).
Bankia, bailed out to the tune of 24 billion euros by the
state last year, sold the 12 percent stake on Thursday as part
of a recovery plan agreed with the government and the European
International Airlines Group (IAG) was formed in
2011 by the merger of British Airways and Spain's Iberia.
Losses at the Spanish airline, however, have led IAG to
launch a restructuring at Iberia which includes thousands of
lay-offs and sparked strike action earlier this year in a
country where over a quarter of the workforce are jobless.
"A forced sale like this one tends to have dangerous
implications. The (Spanish) government should be able to have a
say in its only national airline, which has a major role in the
economy," said Jose Maria Marin, a professor at the state-run
National University of Distance Education (UNED).
As a result of the stake sale, the Spanish government -
through Bankia - will lose a seat on IAG's board. However,
certain safeguards for Iberia's business that were put in place
at the time of the merger - such as the routes it can fly -
remain in place until 2016.
"Spain's influence in IAG is reducing," said Cantor
Fitzgerald analyst Robin Byde. "Iberia now accounts for around
26 percent of IAG's capacity ... maybe those who said the merger
was more of a BA takeover were right."
The buyers of Bankia's stake are unknown, though financial
sources told Reuters that bookrunner Merrill Lynch had sold the
224 million shares to a wide range of investors.
Bankia and IAG said in statements only that the shares had
been placed with "institutional investors".
Last year IAG Chief Executive Willie Walsh said there was no
strategic value in having Bankia as a shareholder and that the
group was open to another airline taking Bankia's stake, though
analysts doubted a rival would step in.
There had been speculation Qatar Airways may be interested
in the stake but both Walsh and Qatar Air CEO Akbar Al Bakar
dismissed the possibility.
MORE TO COME
Iberia has become unprofitable in all markets, including
long haul, and its problems are critical, IAG said last week.
The Spanish airline reported an operating loss of 202 million
euros in the first quarter.
Staff staged two five-day walkouts in February and March but
halted industrial action after IAG reduced the number of
lay-offs at the Spanish flag carrier to 3,141.
Bankia's stake in IAG was sold at 256 pence per share,
Bankia said, a 3 percent discount to Wednesday's closing price,
and bringing in a 167 million euro capital gain for the lender.
"There was a bit of fear about the sale because 12 percent
of the company's capital is quite a lot ... but the discount was
pretty small," said Renta 4 analyst San Felix.
IAG's shares were down 1 percent to 261.4 pence by 1303 GMT,
versus a 0.1 percent decline for European travel stocks.
Bankia's recovery plan following its state rescue last year
targets 8 billion euros from the sale of stakes in listed
companies, which also include a 5.1 percent stake in utility
Iberdrola and 20 percent of tech firm Indra.
The sale of IAG is the first to take place.
Bankia is expected to profit from other divestments as it
already made provisions of 2.5 billion euros to mark down its
holdings to market prices as of Dec. 31 2012.