February 5, 2011 / 2:56 AM / 6 years ago

Fairholme has $1.6 bln in Spain, Portugal paper

2 Min Read

* Bought short-term debt at 2 Euro banks in 2010 -filing

* Debt yields almost twice the benchmark rate

NEW YORK, Feb 4 (Reuters) - Fairholme Capital Management LLC bought a combined $1.6 billion of short-term debt from Banco Santander SA (SAN.MC) in Spain and Banco Espirito Santo SA BES.LS in Portugal last year, according to a regulatory filing.

The Feb. 1 filing with the U.S. Securities and Exchange Commission said that Fairholme Fund held $779 million in commercial paper from the Madrid bank and $834 million of similar debt in the Lisbon-based bank as of Nov. 30.

Yields rose after many investors pulled out of European credit markets. When Ireland was bailed out last year by the European Union, traders feared that Spain and Portugal would need similar assistance, but Fairholme appeared to be betting those fears were exaggerated.

The fund's filing with the SEC said the Santander debt matures between January and March with yields ranging from 0.915 percent to 1.005 percent. Its commercial paper from Portugal's largest privately owned bank, Espirito Santo, matures in January and February and yields 1.103 to 1.355 percent, according to the filing.

The debt yields are almost twice the benchmark London Interbank Offered Rate, which averaged 57 basis points, or 0.57 percent the six-month loan period ended on Nov. 30.

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