STOCK MARKET WATCH -- Thursday, 14 June 2012

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28. Analysis - Zombie borrowers threaten bailed-out Spanish banks

http://www.guardian.co.uk/business/feedarticle/10288682

MADRID (Reuters) - Spanish banks are a little jauntier after a dose of European cash to purge them of their toxic real estate assets, but their refinancing of moribund companies in other sectors could put them back in the emergency room.
Whether out of optimism or desperation, Spanish banks have refinanced billions of euros of debt owed by struggling companies large and small, including property-related firms, to prevent them going bust and avoid writing down the loans while they wait for economic recovery, financial sources said.
But with rising unemployment, falling consumer spending and a return to recession, any recovery looks a long way off, even after the 100 billion euro ($125 billion) lifeline that Spain's euro zone partners stumped up for its banks on June 9.
"Very often banks have rather continued supporting companies on pre-insolvency scenarios instead of facing losses head on and making write-offs and forcing the company into liquidation. This has been very common," said Alberto Manzanares, refinancing expert at the Clifford Chance law firm in Madrid.