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Spain Said to Reject State Roads Guarantee to Shield Budget

Source: Bloomberg - Fri 24th Jan 2014
Spain Said to Reject State Roads Guarantee to Shield Budget

Spanish budget officials ruled out providing a state guarantee for the debt of failed highways, a person familiar with negotiations said.

Government officials are still negotiating with the highway operators and are looking for a solution that protects taxpayers, said the person, who asked not be named before an agreement is reached. The government was considering backing 1.25 Bln of 30-year loans, two different people familiar with the matter said in December.

The Budget Ministry is concerned that a guarantee would set back its plan to reduce the deficit, the person said. It's also battling to stabilize its debt-to-GDP ratio, which is set to peak at 101% in 2015, according to government estimates.

The government has been considering ways to rescue about 364 miles of insolvent highway concessions owned by builders including Ferrovial SA, Sacyr SA and Actividades de Construccion y Servicios SA. They're entitled to the rescue through a 1972 law, which stipulates that when a private highway goes bust, the state has to repay its owners for the cost of the land and the construction.

There are several alternatives under discussion and no decision has been made, a Madrid-based spokeswoman at the Public Works Ministry said. She asked not be named citing government policy.

Ferrovial shares extended losses on the news to close 2.7% lower at 14.26.

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