Spain's Bankia aims for 4.2 billion euro debut

 

Savings bank Bankia aims to raise up to 4.2 billion euros in a steeply discounted initial public offering seen as a key test for Spain's overhaul of its financial system, sources said on Wednesday.

Spain's biggest savings bank, formed from seven savings banks or 'cajas', has set its indicative price range for the flotation at 4.41 to 5.05 euros per share, around half of book value, and aims to start trade in mid-July, sources close to the operation said.

The IPO prospectus has yet to be published and is expected to be approved by the stock market regulator later on Wednesday.

Bankia declined to comment.

Bankia must raise the capital to meet strict new solvency levels set by the Bank of Spain and is plowing ahead with its stock market listing despite tough market conditions for IPOs and a fresh crisis of confidence in the euro zone.

A smooth stock market listing for Bankia would gauge the success of Spain's banking sector overhaul, started earlier this year by a government seeking to reassure markets about the stability of the country's financial system.

GREECE OVERSHADOWS

Greece's struggles to restructure its debt from an international bailout one year ago have reignited fears about Spain's ability to reduce its deficit and have lessened investor appetite for the euro zone's fourth largest economy.

The premium charged by investors to hold Spanish 10-year debt over benchmark German bunds is grazing all-time highs at around 260 basis points.

Spanish malaise aside, market uncertainty has hit new listings in Europe this year with many deals pulled and others performing poorly after their flotations. This has led to burned investors demanding bigger discounts.

Despite encouraging signs from some deals getting done, like Italian shoemaker Ferragamo, investors remain choosy, bankers say.

"In this sort of environment the IPO has to be perfect," said one equity capital markets banker. "The market is unforgiving." Bankia has until the end of March 2012 to carry out the listing, under Bank of Spain rules. It could still postpone its stock market flotation until September or October but is under political pressure to get the deal done as soon as possible.

A delay in the flotation would be bad for the ruling Socialists as they try to reassure markets that Spain is doing its homework to avoid being dragged into the euro zone debt crisis. And the conservative opposition does not want to inherit the problem if it wins the next general election, as polls indicate it will.

Bankia is looking to sell 824.6 million shares aiming to raise up to 4.2 billion euros, the sources said, which could rise to as much as 4.6 billion euros if an overallotment option is exercised.

Smaller savings bank Banca Civica said on Wednesday its board had approved a stock market listing. Banca Civica is aiming to raise 900 million euros from floating a stake of around 40 percent to patch a capital hole.