Administration saves €950 million by paying off loan early

Plan is to return part of 27-billion-euro credit taken out to help regional and local governments pay their suppliers

The government has informed banks that it will be repaying three years ahead of schedule 12 billion euros it borrowed to create a fund last year to help regional and local governments pay off debts to service suppliers, sources told EL PAÍS Thursday.

Fernando Jiménez Latorre, chairman of the council that oversees the so-called Fund for the Financing of Payments to Suppliers, sent letters to some 20 banks, including BBVA, Santander, Bankia and Caixabank, informing them of the government's "irreversible decision" to pay off the loan early. In May 2012, the Rajoy administration signed up to a syndicated loan of 27.371 billion euros with a maturity date of five years and 18 months.

Government sources say positive market conditions have allowed for the early payoff. The Rajoy administration stands to save some 950 million in interest payments through this operation, financial sources said.

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