Portugal investor roadshow slips under the radar

Fri Mar 22, 2013 12:25pm EDT

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* Portugal tours Germany, France and London in busy week

* Investors say country ready to issue 10yr, new bond likely

By John Geddie

LONDON, March 22 (IFR) - While the Cyprus bailout has hogged the limelight this week, Portugal took the opportunity to remind investors that it is doing its damnedest to make its own way in the capital markets.

The country, rated Ba3/BB/BB+, embarked on its most extensive European roadshow since it entered an EU/IMF bailout programme in mid 2011, meeting investors in Germany, France and Europe's financial hub London.

Having successfully returned to the market with a EUR2.5bn tap of its five-year bond in January, the debt agency has since indicated it plans to issue 10-year debt.

Last week Ireland obtained EUR12bn booksize for a EUR5bn 10-year bond, the first benchmark from the sovereign since its bailout.

"Without Cyprus, they would have issued new debt this week," said one investor present at the meetings.

"Now they will probably wait one or two weeks, until after the Easter break."

First and foremost in the mind of the Portuguese funding officials is to demonstrate market access, which ultimately could trigger the European Central Bank's bond-buying scheme.

"This additional liquidity will help push down yields for Portugal, and private sector issuers in the country," said the investor.

TO TAP OR NOT TO TAP

Speaking to IFR last month, Portuguese debt agency chief Joao Moreira Rato said further debt issuance in 2013 would likely be through taps of existing euro bonds, to hit its planned EUR5bn of bond issuance.

However, market participants believe there is a high probability that Portugal will issue a new bond, as new eurozone rules require 55% of monies raised each year to have Collective Action Clauses (CACs), and these are not written into its existing bonds.

The new deal is likely to be EUR2-3bn in size, added the investor.

One banker close to discussions urged Portugal not to underestimate the importance of taking size out of the market, when opportunities present themselves.

Portugal has a manageable EUR5.8bn of redemptions coming up in September this year, but this is followed by a hefty EUR13.8bn due in 2014 and EUR13.4bn in 2015.

With this in mind, Portugal may see this week as an opportunity lost, especially as its bond yields proved fairly resilient to the negative headlines coming out of Cyprus.

Apart from an initial knee-jerk reaction that saw Portugal's 10yr yields hit 6.30% at Monday's open, up from 6.0% at the close of play on Friday March 15, the country has actually seen some performance throughout this week with yields back to 5.95% this session. (Reporting by John Geddie, editing by Andy Perrin and; Alex Chambers)

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