Bank bailout to spark firesale of corporate Spain [Reuters]
June 27, 2012 Leave a comment
The European bailout for Spain’s banks will push them to sell an empire of stakes in the nation’s top companies, ending a cozy culture of corporate-banking links and prompting a wider shake-up in ownership of the company landscape.
Spain formally requested euro zone rescue loans to recapitalize debt-laden former savings banks on Monday, but those who receive funds will be subject to European Union state-aid rules that include selling equity assets.
With the price of such assets languishing as the euro zone’s financial crisis drags on, that will involve the likely fire sale of big chunks of Spain’s corporate titans, including telecoms leader Telefonica (TEF.MC), oil major Repsol (REP.MC) and power firm Iberdrola (IBE.MC).
UBS estimates 22 billion euros ($28 billion) of Spanish stakes could be up for sale, most of which is in the hands of savings banks. This represents as much as 9 percent of the capitalization of the country’s blue-chip index .IBEX.
Over the years, Spain’s savings banks have gained board seats on some of the country’s biggest firms, exerting a powerful role in shaping corporate and industrial strategy in sectors ranging from tourism and real estate to energy and telecommunications.
Established centuries ago to help farmers in times of poor harvests, the savings banks developed strong regional and political identities in a closely intertwined corporate and banking culture of mutual back scratching.
Banks rolled over debt for cash-strapped companies to prevent loans from going bad, while bankers earned considerable salaries for sitting on company boards.
Not for much longer.
“They’re going to have to sell. And with no light at the end of the tunnel as far as the macro, political dance, the chances of holding out for a better price increasingly look like wishful thinking,” said Flemming Barton, analyst at CM Capital Markets.