UPDATE 2-Iberdrola sells 1 billion euro bond

Mon Jan 21, 2013 12:22pm EST

(Adds final auction details)

MADRID Jan 21 (Reuters) - Spain's Iberdrola sold 1 billion euros ($1.3 billion) of a new eight-year benchmark bond on Monday in a fresh push to raise funds and clean up its debt portfolio.

Iberdrola, which is also selling assets as part of a drive to cut net debt to 26 billion euros by 2014, joins the likes of fellow Spanish companies Telefonica and Repsol in working to preserve their investment-grade credit ratings.

The country's largest companies and banks are taking advantage of a start-of-the-year drop in risk premiums of struggling euro zone economies to issue paper after spending much of 2012 shut out of nervous markets.

The bond, which matures in February 2021, was priced at 205 basis points over mid-swaps, a reference for fixed-income investors.

That yield is more than 1.5 percentage points below what the government is paying for sovereign debt of a similar maturity. Iberdrola's debt rating is one or two notches above that of the sovereign, which both Moody's and Standard & Poor's rate one notch above junk.

Iberdrola mandated BBVA, Credit Agricole, Goldman Sachs, HSBC, ING and Lloyds to handle the issue on Monday.

The utility also offered to buy back as much as 500 million euros in four bonds, with an acceptance date and pricing expected Jan. 29, Thomson Reuters IFR said earlier on Monday. ($1 = 0.7524 euros) (Reporting by Paul Day and Tracy Rucinski; Editing by David Goodman and Helen Massy-Beresford)