MADRID Feb 21 Spain's government is studying
measures to help struggling companies restructure their debts,
which could include transferring banks' exposures to such firms
to a newly-created external fund, a banking source familiar with
the talks said.
Spanish investment bank N+1 has produced a study, seen by
Reuters, on the potential creation of a vehicle that would aid
debt-for-equity swaps by allowing banks to exchange loans for
stakes and transfer those stakes to an externally-managed fund.
Spain's economy ministry, which is working on new corporate
debt rules, said the report was independent and there was no
official discussion on that topic.
"We are working on a law to adopt measures that will allow
companies with high debt levels or which are in the process of
restructuring debts, but which are still viable, to continue
operating," a spokesman for the economy ministry said.
N+1 could not be reached for comment.
El Mundo and ABC newspapers reported earlier on Friday that
the government was looking at the N+1 report as it works on
changes to financial legislation, and the banking source also
said it was assessing the plan.
Debt-for-equity swaps typically involve banks or other
creditors writing off loans to struggling companies in exchange
for part of their capital.
Banks are not always keen, however, to end up owning
companies which they then have to try to turn around, and
sometimes prefer to sell the debts on to third parties such as
distressed debt funds, although they often do so at a loss.
Critics say banks' reluctance to take such losses or swallow
the pain from restructuring debts is not helping Spanish
companies - among the most indebted in Europe - clear their loan
burdens quickly enough.
Many are still struggling to pay loans even as Spain emerges
from a prolonged recession, and Spanish banks' soured debts as a
percentage of credit reached a fresh record high of 13.6 percent
(Reporting by Jesus Aguado, Writing by Sarah White; Editing by