* Spanish, Portuguese borrowers storm market as spreads
* Bankia among banks tipped to follow
* Caixa Geral, Sabadell and Red Electrica end the week on a
By Aimee Donnellan and Josie Cox
LONDON, Jan 11 (IFR) - Iberian issuers have stormed debt
capital markets in the first two weeks of 2013, fuelling hopes
that lower tier issuers from other corners of the periphery will
be able to follow suit as investor confidence picks up.
National champions such as Telefonica, Gas Natural and BBVA
have built on well-received bond deals in the fourth quarter to
secure even tighter pricing this month, and as Bankinter, Caixa
General, Sabadell and Red Electrica emerged on Thursday and
Friday, syndicate bankers predicted that there is plenty more
supply to come.
Issuers including Bankia and Santander Totta are among those
tipped by syndicate bankers to make a comeback.
"Everyone is focused on buying something that will bring
them strong yield returns," said a syndicate banker.
"There aren't too many correction triggers ahead that could
pull us off course, which is helping to drive momentum for names
A relentless spread rally since mid-November, which has
driven corporate and financial credit indices around 25% and 30%
tighter, respectively, has enabled even more troubled issuers to
Spanish agency FADE - which twice had to pull deals in 2012
- saw its 4.125% EUR1bn four-year issue more than twice
subscribed this week.
Not including Friday's deals, Spanish and Portuguese issuers
this year have sold more than EUR5bn-worth of bonds - o r just
under a quarter of the EUR21.5bn total supply - in the corporate
and FIG markets.
TOO MUCH TOO SOON?
Bankia's secondary covered bond spreads have tightened by
around 170bp over the past two months, and according to one
market source, the recently recapitalised bank is currently
monitoring the market ahead of a potential bond.
Some deals have sparked fears that the market is getting
ahead of itself - signalled in particular by enquiries for Bank
of Ireland's CoCo and big rises in illiquid long-dated bonds
such as Telecom Italia's 2055s.
Subordinated financial bonds have also rallied sharply,
including a nine point rise in Banca Popolare di Milano's 2018s.
The strong demand for Spanish senior bank debt, however, is
more logical, some experts argued.
Senior bank debt has generally benefited from the ECB's
LTROs, and losses have not been imposed on senior bank
bondholders when stressed banks have been restructured, they
"The fact that we've seen reverse enquiry for a risky CoCo
instrument for the Bank of Ireland, and the fact that long
dated 30-year corporate bonds jumped a lot in price already this
year is food for thought," said Barnaby Martin, a credit
strategist at BofA Merrill Lynch Global Research.
"It shows that the credit market is moving at light speed in
THE PUSH BACK TO CORE
The deepening liquidity in the market has even extended to
Portuguese credits, as Banco Espirito Santo (BES) and Caixa
Geral made a return in the financials sector, but in general,
syndicate bankers say investors are still differentiating
That was evident in the stronger demand and better secondary
market performance seen for BES - a bank deemed to be a
systemically important financial institution - than the demand
for second tier Spanish issuer Banco Popular Espanol.
"Investors are not buying blindly but they are certainly
opening up their credit lines to peripheral names," said Ralf
Grossmann, head of covered bond origination at Societe Generale.
"Sentiment is clearly improving and I think we are getting
to the point where Spanish and Italian names are starting to
retrace spreads to their core counterparts."
BES, Portugal's second largest private bank by assets,
attracted a EUR3bn order book for its EUR50m five-year deal,
while Banco Popular saw just EUR1.3bn-worth of demand for its
EUR750m 2.5-year trade.
However, international demand for both transactions was
strong at around 90% and 72%, respectively - an encouraging sign
that Iberian issuers are no longer dependent on domestic demand.
The decision by some issuers to hold off rather than pay up
has also worked in their favour.
Caixabank - Spain's largest savings bank - staged a return
to the FIG market following a hiatus of more than two years to
sell a blow-out EUR1bn long three-year senior unsecured bond at
mid-swaps plus 285bp on the back of orders in excess of EUR5bn.
"Caixabank clearly found the opening it was looking for,"
said Armin Peter, head of FIG Flow syndicate at UBS.
"We are somewhat back to the good old days where spreads
are starting to reflect the true value of the bank paper."
In the corporate space, analysts at Bank of America Merrill
Lynch point out that peripheral corporates are now only 90bp
wider than core corporates, and some cyclicals have ripped
This peripheral magic assisted both Spain's Telefonica and
Gas Natural, both rated Baa2/BBB/BBB+, to bring stand-out
10-year transactions to the market this year already.
The former's deal, which marked the first from a corporate
peripheral borrower this year, attracted EUR10bn in demand,
sending a positive signal to the company that is bracing itself
for a swathe of looming redemptions.
The coupon of 3.987% represented the lowest on a 10-year
bond from a peripheral corporate borrower in around eight years,
a lead on the deal said.
On Friday, Red Electrica prepared to price a EUR400m
nine-year deal that was already six times oversubscribed within
two hours of bookbuilding.