In the face of a potential state bail-out, many of the world’s largest hedge funds and private equity groups are holding talks with Spain’s regional savings banks as they rush to secure €15bn ($21.3bn) in new capital.

Mark Spinner, private equity partner at international law firm Eversheds, comments: “The reality of the situation is that the hedge funds and private equity houses will see this as an opportunity to make an investment on advantageous terms, taking advantage of the significant need of the Cajas to raise capital to avoid a State bail-out. If this happens, it is likely to be even more painful than accepting hedge fund or private equity money. There is still a wall of funding available to the hedge fund and private equity industry and, as such, they are seen as a good source of capital. History supports the contention that one of the most successful ways of making money in hedge fund/PE investing is to buy well (i.e. cheaply) and the current situation in Spain appears to present an ideal opportunity to achieve this objective.”