January 23, 2013 / 12:41 PM / 5 years ago

Madrid breaks back into public market on bullish Spain sentiment

LONDON, Jan 23 (IFR) - Spain’s capital city gained from the shift in investor sentiment towards peripheral Europe on Wednesday, as EUR1.9bn of orders were placed for its new five-year bond issue just months after it was forced to pull a meagre EUR250m tap.

Madrid, rated Baa3/BBB-/BBB, will price a new EUR1bn February 2018 bond later on Wednesday, at 190bp over the Spanish government’s 4.5% January 2018 bond, via lead banks Barclays, BBVA, Credit Agricole, Santander and Societe Generale.

The final spread was set at the tight end of guidance at 190bp-195bp and initial thoughts of 200bp area.

At that spread against the reference sovereign bond, which is currently bid at 3.952% on a yield basis, the new bonds will be priced to yield around 5.8%.

Its last attempt at a public deal back in late October 2012 ended in disaster after it failed to gain enough interest in a EUR250m tap of its 4.688% March 2020, despite trying to coax investors with a 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 of the 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 blowout 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 follow Madrid back into public markets in the coming weeks. (Reporting By John Geddie; additional reporting by Jon Penner; editing by Alex Chambers)

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