LONDON, Jan 10 (IFR) - Bailed-out Bankia returned to the
public funding market with a bang this week, ending a near
two-year funding drought with the sale of EUR1bn of five-year
senior unsecured debt and fuelling hopes that it can free itself
from government ownership.
UK and domestic fund managers and hedge funds threw their
weight behind Spain's fourth biggest lender, providing the bulk
of the EUR3.5bn of orders the bond received despite a mere 3.5%
"This is such an important step for Bankia following its
bailout," said Fernando Cuesta Blazquez, head of funding at
"Our goal is to maximise value for our shareholders, but at
the end of the day the decision regarding the future
privatisation is up to the FROB," he said. "At this stage there
has not been any formal conversation with them, and our job now
is to bring about a turnaround of the bank."
Spain's government, which owns about 70% of Bankia through
parent company BFA, has until 2017 to return the bank to private
hands, though investment bankers in Madrid say that could happen
earlier if its turnaround gains momentum, with the state
possibly starting a sell-down towards the end of 2014.
Bankia's successful return to international funding markets
marks a significant turning point after the country's banks were
crippled by a 2008 real estate crash that led several into state
In 2013, Bankia posted the biggest loss in Spanish corporate
history, taking nearly EUR24bn of provisions on property loans
in an attempt to wipe the slate clean.
Lenders, eyeing potential uncertainty in coming months from
a Europe-wide check on banks' balance sheets and stress tests
later this year, are raising funding at favourable levels while
Bankia hired its own syndicate team, Bank of America Merrill
Lynch, Commerzbank, Natixis and UBS to market the deal and
priced at mid-swaps plus 235bp, 15bp inside initial price
"This is the best wholesale funding level Bankia has been
faced with in years as we are now pretty close to normalising
our funding levels," said Cuesta Blazquez.
With so many questions about its future, the bank had been
locked out of the market due to prohibitive funding costs since
2012, but that changed in the autumn of last year when Spanish
sovereign yields stabilised and then rallied by more than 50bp
from the end of December to this week.
"We were confident that the market would be supportive at
the beginning of January but hadn't anticipated the rally we
have seen this week," said Cuesta Blazquez.
Despite a supportive market backdrop, the issuer and
syndicate bankers had done their homework and had met with
investors at the tail end of last year with a view to getting in
ahead of the pack in January.
Bankers decided a generous new issue premium of at least
20bp was needed to ensure the success of the deal.
In the wake of the transaction, Bankia says it has no
immediate need to raise additional unsecured or secured funding,
but will be monitoring the market closely for opportunities.
"We decided to sell a senior deal and will be keeping our
covered bond collateral dry for times of stress or extending
duration. Certain investors were encouraging us to issue Tier 2
or Additional Tier 1, so in the medium term that may be a
possibility," said Cuesta Blazquez.
(Reporting by Aimee Donnellan; additional reporting Sarah
White; Editing by Helene Durand, Alex Chambers and Julian Baker)