Flowers cools on Spain bank deal amid crisis

LONDON, Dec 6 (Reuters) - J.C. Flowers has cooled its interest in investing in a Spanish caja until Spain has restored faith in its finances, the head of the U.S. private equity firm said on Monday.

If Flowers backs away from Banca Civica it would be a blow to the troubled savings banks, or cajas, as Spain is attempting to accelerate the consolidation of the industry, who are seen as needing capital after a severe recession.

J.C. Flowers is led by Christopher Flowers, who told the Financial Times that any investor would have to be “pretty brave” to move into Spain or Ireland at present. A spokesman for the private equity firm confirmed his comments.

Flowers in July pledged to buy 450 million euros ($603.9 million) in convertible bonds in Banca Civica, when the caja failed a stress test and was told to raise capital. [ID:nLDE66M221]

The deal was non-binding. “That has never been superseded by a formal agreement. Consequently we have not made any investment in Spain and are not committed to do so,” Flowers told the newspaper.

The paper said he stressed he was unlikely to buy a bank in any country facing concerns about its sovereign credit risk, but an investment in Civica would make sense when it completes merger discussions with CajaSol, another caja.

Shares in Spanish banks fell on Monday, with the major players Santander SAN.MC and BBVA BBVA.MC both off around 2.5 percent. Smaller banks including Banco Popular POP.MC and Banesto BTO.MC were also marked lower.

Flowers is also casting an eye on Ireland, people familiar with the matter have told Reuters. [ID:nLDE6AO187]

That could include an investment in Bank of Ireland BKIR.I or Allied Irish Banks ALBK.I, who both need fresh capital, or asset portfolios, if the government limits the downside risk. ($1=.7452 Euro) (Reporting by Steve Slater; Editing by Hans Peters)