To limit the impact, Sareb aims to accelerate asset sales and reduce its debt, the source said. In 2021, Spain's deficit including Sareb was 6.87%. Spain is the fourth most indebted country in Europe. A government source said that Sareb's higher funding costs will impact the deficit in 2022 and 2023, without elaborating. It was unclear what Sareb's costs for servicing debt were in 2021. Sareb, the FROB and the Economy Ministry declined to comment. Sareb is now more exposed to an impact from higher interest rates because of a swap deal that expired last month. Sareb had a long-term swap deal for 85% of its senior debt, around 42.5 billion euros. The 3-month euribor that the swap was benchmarked to, climbed from -0.56% at the beginning of 2022 to 2.063% by the end of last year. The swap, one of the largest signed in Europe by an institution to protect itself against fluctuating interest rates, expired last month and was not renewed. In 2021, Sareb's costs of funding and the swap coverage rose to around 400 million euros. It is expected to publish results for 2022 later this week. Established in 2012 to take on bad loans from the financial crisis, Sareb has suffered from a slump in real estate prices which has depressed the value of its loans and assets. Initially, Sareb took on more than 50 billion euros in real estate and other toxic assets from nine Spanish savings banks. In exchange, it issued debt underwritten by the state for the same amount. After selling 17.1 billion of all debt issued, Sareb holds 33.6 billion euros in senior debt as of June. ($1 = 0.9379 euros) (Reporting by Jesús Aguado and Belen Carreno; Editing by Aislinn Laing and Elaine Hardcastle)
Messaging: Reuters Messaging: jesus.aguado.reuters.com@reuters.net)) (Fixes typo in headline)
By Jesús Aguado and Belén Carreño
MADRID, March 29 (Reuters) - Spain's bad bank will
accelerate asset sales and reduce debt in the face of a bill of
around 300 million euros ($323.55 million) in higher costs to
service more than 30 billion euros of its senior debt during
2022, a source with direct knowledge of the matter said.
The cost of servicing the debt, which has swelled with
higher interest rates, will impact state coffers as the Spanish
government owns more than 50% of the bad bank or Sareb, through
the bailout fund FROB.
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