Spain's tariff deficit agency set to complete funding programme
LONDON, Oct 29 (IFR) - Spain's Electricity Deficit Amortisation Fund (FADE) is set to complete its EUR24bn funding programme on Tuesday, when it launches a new three-year benchmark bond.
FADE, rated Baa3/BBB-/BBB, has already received orders of nearly EUR1.7bn for the December 2016 bond, which leads say will allow it to complete its funding before its deadline of April 2014.
The government-guaranteed security is set to be issued with just a 20bp pick-up to Spanish government bonds (Bonos), suggesting a reoffer yield of around 2.32% at current market rates. BBVA, Goldman Sachs, HSBC and SG CIB are running the transaction.
The bonds were earlier marketed to investors with a pick-up to Bonos in the low 20s, but as demand grew throughout Tuesday morning, guidance was tightened.
The final spread suggests the bonds are paying a small 1bp new issue premium to FADE's outstanding curve. A straight-line interpolation of FADE's 2.875% September 2016s and 4.125% March 2017s, respectively bid at 2.24% and 2.38% earlier on Tuesday, placed fair value on a new December 2016 maturity at 2.31%.
The agency completed its original EUR20bn funding programme earlier this year, designed to repay the deficits created by a gap in the cost of supplying power and the state regulated tariffs charged to end-users.
In July, however, Spain announced the fund would have to raise an additional EUR4.1bn in the market after the tariff deficits accumulated by utility companies exceeded EUR5.6bn last year.
It subsequently raised EUR2bn via a long five-year deal towards the end of last month, and has issued a number of other smaller private placements since, said market sources.
FADE was set up by the Spanish government in 2010, and has authorisation to issue new debt until April 2014. (Reporting by John Geddie; Editing by Philip Wright)
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