January 23, 2013 / 1:51 PM / 5 years ago

CORRECTED-UPDATE 1-Madrid returns to bond markets to tie up funding needs

(Corrects to show private placement took place on Wednesday, not Tuesday)

By John Geddie

LONDON, Jan 23 (IFR) - Spain's capital region gained from the shift in investor sentiment towards peripheral Europe on Wednesday, as it managed to place all its authorised debt issuance for 2013 in one fell swoop.

Madrid, rated Baa3/BBB-/BBB, is set to price a new EUR1bn February 2018 bond later on Wednesday, on top of what banks are calling one of the largest private placements from a Spanish region in the last couple of years.

Over EUR1.9 investors piled into Madrid's first public deal in 10 months, which will allow it to print the bond at 190bp over the Spanish government's 4.5% January 2018 bond, via lead banks Barclays, BBVA, Credit Agricole, Santander and Societe Generale later on Wednesday.

Meanwhile, Goldman Sachs has already wrapped up EUR1bn private placement of Madrid's September 2026 bonds on Wednesday.

Spain's Madrid region has now sold all of the debt it is authorized to issue for this year, marking a significant reversal of fortunes for the region that was shut out of markets for long periods of 2012.


Its last attempt at a public deal back in late October 2012 ended in disaster after it failed to gain enough interest for a meagre EUR250m tap of its 4.688% March 2020, despite trying to coax investors with a generous 275bp pick-up to the sovereign.

Spain's devolved funding approach via its 17 autonomous regions hit the headlines in 2012 when Spain announced an EUR18bn fund to bailout the indebted regions.

Many other regions were locked out of capital markets for long stretches of last year as yields escalated. Even the announcement of the ECB's bond-buying scheme in September, which put in place a liquidity backstop for Spain, failed to prise open markets for many of Iberia's sub-sovereign issuers.

Madrid's last public bond deal was a EUR665m 4.750% three-year back in March 2012, and it had since muddled through with smaller-sized private placements.

However, Spain's blow-out EUR7bn 10-year bond issue on Tuesday, that received orders approaching EUR23bn, appears to once again opened the door for the regions, with bank syndicate officials tipping more regions to start regaining a foothold in capital markets, through private placements and possibly more public deals. (Reporting By John Geddie; additional reporting by Jon Penner; editing by Alex Chambers)

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