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Bankia SA Restructuring to Impose Big Losses on Shareholders and Bondholders-Dow Jones

Friday, 22 Mar 2013 04:12pm EDT 

Dow Jones reported that Bankia SA's shareholders will be nearly wiped out and its junior bondholders will lose around 30% of their original investment in the restructuring plan for Spain's largest ailing bank, the country's bailout fund said Friday. Under the strict terms of a European Union-financed cleanup of Spain's banking industry, the Fund for Orderly Bank Restructuring, or FROB, is forcing investors to bear heavy losses before injecting public funds into the banks. In Bankia, the nominal value of its shares will be reduced to one European cent from two euros and the nominal value of its preferred shares and subordinated debt will be reduced to EUR4.841 billion from EUR6.911 billion. To recapitalize Bankia, the EUR4.841 billion worth of preferred shares and subordinated debt will be converted into ordinary shares, while the FROB will inject EUR10.7 billion. This recapitalization will result in a massive dilution for Bankia's current shareholders, who will be left with less than 1% of the bank. Friday's announcement is an important step forward in the costly cleanup of a sector hurt by the collapse of a decadelong housing boom. Spain has received just over EUR40 billion in EU aid, which is being channeled through the FROB, to finance the bank restructuring. 

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