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When the Spanish bank bailout was announced, the head of the European Commission made a big show of saying that the money would be provided on good terms for the lenders.That appears to have been a crock.
rumours are beginning to circulate about the terms of the deal:
- The Spanish government organisation receiving the funds—FROB—will likely have to repay the funds at a 3 per cent interest rate.
- It won’t start making payments until 2017.
- It will have a 15-year repayment schedule.
- Banks could ultimately have to repay the loans at an interest rate of 8.5 per cent.
Given that Spain’s 10-year bonds are currently trading at yields over 6 per cent, Spain could be getting a sweetheart deal relative to the price it would pay to recapitalize banks on its own.
That is, if concerns about investor subordination and the size of the bailout end up being unwarranted.
Regardless of all these details, however, it is important to remember that the terms of the deal will not be finalised until the end of this month at the earliest.