January 9, 2014 / 9:52 AM / 4 years ago

UPDATE 4-Portugal demonstrates international appeal with bond deal

(Adds final pricing details, investor distribution)

By John Geddie

LONDON, Jan 9 (IFR) - International investors swooped on Portugal’s EUR3.25bn bond tap on Thursday, in a positive sign for the country, which plans to exit its bailout on schedule in the middle of this year.

Over EUR11bn of orders were placed for the increase of its 4.75% June 2019, according to a lead banker, with around 88% of bonds placed with investors outside of the country.

“It is an expression of investors’ continued confidence in Portugal’s ability to fund as it looks to exit its bailout programme in June this year,” said Fabianna del Canto, managing director, European syndicate at Barclays, one of the banks managing the deal.

Yields on Portugal’s benchmark 10-year bond have rallied over 50bp since the start of the year, hitting a low of 5.46% on Wednesday, before widening out a fraction on the supply news.

Portugal, rated Ba3/BB/BB+, first marketed the tap with initial price thoughts of mid-swaps plus 340bp area earlier on Thursday morning, with official guidance then announced at 335bp area when interest topped EUR5bn.

The tap priced at a spread of mid-swaps plus 330bp, equivalent to a yield of 4.657%.

Approximately 280 accounts participated in the deal, with the largest percentage of bonds sold to accounts in the UK, at 38.3%. The rest of the bonds were distributed across Scandinavia (8.9%), Germany/Austria/Switzerland (7.5%), France (7.4%), the US (7.4%), Italy (5.1%), Spain (4.7%), other Europe (4.5%) and other (4.4%), while 11.8% were placed with domestic investors.

By investor type, the majority was placed with asset managers, at 61%. Insurance/pension funds took 16%, banks 13%, hedge funds 7% and central banks 3%.

With this deal, Portugal has raised almost one-third of the EUR10.5bn in bond issuance envisaged by the government’s 2014 budget.

Lead managers Barclays, CaixaBI, Goldman Sachs, HSBC, Morgan Stanley and Societe Generale managed Thursday’s tap. (Reporting by John Geddie, Editing by Julian Baker, Helene Durand)

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