* Telefonica raises 1.2 bln euros with 7-yr bond
* Improved sentiment aids 2nd bond issue in a month
* Issue attracts around over 8 billion euros of demand
* Telefonica faces 57 bln euro debt pile
(Adds final price, yield, background)
MADRID, Oct 5 Debt-laden Spanish telecoms group
Telefonica issued seven-year debt in its second cash
call in a month on Friday, taking advantage of ECB-backed credit
improvements in struggling euro zone countries.
Telefonica raised 1.2 billion euros of the bond at a final
price of 330 basis points over mid-swaps.
Demand for the bond, due Jan. 2020 with a 4.71 percent
coupon, was around 8 billion euros, according to IFR, a Thomson
Reuters news and markets analysis service.
Sentiment towards corporate debt has improved since the
European Central Bank outlined in early September an unlimited
government bond-buying programme to help weak economies.
Spain's Prime Minister Mariano Rajoy has resisted applying
for European aid, which would trigger the ECB programme, but
investors' belief that such a move is inevitable has brought
down premiums for the euro zone periphery and its companies.
Telefonica, eager to reduce its 57 billion euros debt pile
and keep its prized investment-grade credit rating in its
crisis-hit home nation, announced this week that it would list
part of its German mobile business, O2.
Telefonica issued a 750 million euros five-year bond on
Sept. 5 and increased the issue to 1 billion euros Sept. 7,
joining other companies in peripheral Europe by taking advantage
of the uptick in investor confidence and breaking a six-week
debt issuance freeze.
Sentiment for Telefonica's paper sale on Friday was also
supported by Spanish bank BBVA's successful sale of $2
billion, three-year bond, on Thursday, the first time U.S.
investors have shown interest in buying Spanish financial risk
in more than 17 months.
Telefonica mandated Bayer LB, BNP Paribas, Citi,
Commerzbank, MUSI and SG CIB for Friday's issue.
The company must raise between 7 billion and 8 billion euros
a year through 2015 to cover debt maturities and risks
refinancing costs spiking higher if Spain loses its investment
grade credit rating.
(Reporting by Clare Kane; Editing by Paul Day and David Cowell)