REFILE-Spanish agency FADE makes new bid for market return

Wed Nov 28, 2012 12:34pm EST

(Refiles to change RIC code without changes to the story)

By John Geddie

LONDON, Nov 28 (IFR) - Spain's efforts to get a handle on its escalating electricity tariff deficit has stepped up after the fund set up to securitise the debt, FADE, indicated to dealers that it is adamant on returning to the market after being locked out for over a year.

FADE has twice attempted to print a bond in 2012, but pulled back on both occasions after investor interest waned, forcing up the cost of funding.

The fund has now sent out a new request for proposals (RFP) to banks for an unspecified future deal, which banks acknowledge renders any previous mandate redundant.

"Their actions suggest that the previous mandated lead bank group has now been disbanded," said one bank source previously mandated by FADE on the failed deals.

FADE was set up by the Spanish government in 2010 to fund deficits accrued by utility companies where costs incurred to supply power are greater than the state regulated tariffs charged to the end-user.

The RFP sent out earlier this week requires banks to indicate their underwriting capabilities and fees for a variety of bond maturities out to 15 years. FADE is now mulling over its options, but sources state the issuer will want to return as soon as possible.

"There are not many opportunities left between now and year end, but it is feasible that FADE could announce a deal in that time," said the bank source.

FADE had previously mandated Citigroup, Credit Agricole, Credit Suisse, Deutsche Bank, HSBC and Santander to lead manage two syndicated bond deals back in 2011. The first of those emerged in September 2011, an EUR1.5bn 4.4% two-year priced at 98bp over Spanish government bonds. But the second never came to fruition.

PULLED DEALS

First the agency pulled a four-year benchmark issue in January that had been announced to the market with the aim to price in the region of 70bp over BONOs. At second attempt the issuer was more discreet, lining up a call with investors on a Monday afternoon in mid-November but not publicly announcing a specific deal. Banks close to discussions said they had shown the issuer some prices for a slated EUR500m-EUR1bn transaction, and that FADE then decided not to proceed.

Now that deal will never materialise, said banks.

FADE is committed to alleviating EUR20bn from the balance sheets of Spanish utility companies by taking these so-called tariff deficit receivables and funding them in the capital markets with the strength of an explicit and irrevocable sovereign guarantee.

Since its inception, it has completed approximately EUR13bn of funding, including EUR9.5bn issued through public syndications and private placements in 2011, according to a FADE investor presentation updated this month.

In 2012, however, the issuer's debt-raising has stalled. It managed to raise a respectable EUR3.2bn via private placements in the first two months of the year but has since only issued a handful of deals, each in the region of around EUR100m.

In the meantime, the Spanish government has floated a number of alternative solutions to tackle the deficit, the latest of which is a draft reform to pass on some of the cost to consumers via new tax charges. (Reporting By John Geddie; Editing by Alex Chambers and Julian Baker)

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