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Spain's Bankia agrees to sell bad loans and real estate worth nearly €3.07B

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Spain's Bankia agrees to sell bad loans and real estate worth nearly €3.07B

Spain's state-controlled Bankia SA will sell bad loans and repossessed property worth about €3.07 billion to two subsidiaries of U.S.-based fund Lone Star North America Acquisitions LP.

The book value of the nonperforming loans portfolio is approximately 1.42 billion, whereas the foreclosed asset portfolio is valued nearly 1.65 billion, the bank said.

The bad loans portfolio will be fully acquired by an indirect subsidiary of Lone Star, with the portfolio being fully controlled by the American fund. Bankia will retain 20% of the capital in the real estate assets, with the rest being held by a Lone Star subsidiary.

Bankia will save €200 million in pretax costs over three years following the sale's completion.

Although the sale will require it to set aside an additional €85 million in provisions in 2018, the deal will also boost its fully loaded common equity Tier 1 ratio by 12 bps, the bank said.

The sale is expected to reduce the Spanish bank's €6 billion worth of bad loans portfolio and is expected to accelerate its nonperforming assets reduction target by one year.

The deal is expected to be completed in the second quarter of 2019, subject to completion of transaction conditions.