The first actual disbursement would only happen in November. By then, the Spanish government will have established how much money the banking sector needs, after the conclusion of bank-by-bank stress tests. The estimated amount of this disbursement is €45 billion (i.e. the initial €30 billion plus a further €15 billion).
Two more payouts - worth €15 billion each - would then take place in December 2012 and June 2013 respectively. All the disbursements are expected to be provided in the form of EFSF bonds.
The rest of the aid package (up to €25 billion) would be used to complement the toxic assets that bailed out Spanish banks will transfer to an Asset Management Company - a nice way to call a 'bad bank'
The EFSF has also released a new FAQ on the Spanish bailout and the two documents combined raise some interesting questions. The first if over how the loans will be provided - whether in cash directly or in EFSF bonds. The docs suggest the latter for the most part, although it is worth noting that the third disbursement (€15bn) may be used to purchase 'convertible shares' of banks which had aimed to raise money privately, but are struggling - this means that direct cash loans will be needed.
The second question follows on from this. As has been noted elsewhere, the rate at which the loans will be provided is ambiguous. The FAQ specifies that it will be the rate at which the EFSF borrows on the market to raise the money for the bailout, plus a small premium to cover costs. A couple of points to note here:
- First, that this is much lower than the original premiums offered to Greece, Ireland and Portugal - although following the cuts to these rates the difference is not huge;
- Second, if much of the bailout will be issued in the form of EFSF bonds, meaning no market issuance, how will the interest rate be calculated? This remains unanswered, although we'd hazard a guess that the rate may be based off similar issues by the EFSF or an implied market rate.
It's been a week of interesting developments with these documents and the draft Memorandum of Understanding also being released. Unfortunately, the overall picture remains hazy. With details and the package as a whole expected to be finalised at the next meeting of eurozone finance ministers on 20 July, there remains plenty of questions to answer.
Clearing up a point above, as the table shows and as is mentioned in the comments, the €45bn disbursement will carry over €20bn from the first disbursement (as opposed to the full €30bn as suggested above). The remaining €10bn from the first disbursement will be carried over but will continue to be held in reserve until the fourth disbursement.