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Catalonia signs loan as first part of debt package

Source: Reuters - Tue 29th Mar 2011

Spain's indebted north-eastern region of Catalonia issued 800 million euros in debt on Monday, the first of a package of debt refinancing it needs to do this year, spokesman from the Catalan Regional government said .

Catalonia took a four-year 400 million euro loan from Banco Santander and issued a two-year bond worth 400 million euros with a 5.5% yield, which was mostly sold to Spanish investors.

Investors are nervously watching the finances of Spain's regions closely for signs they may be unable to cut spending and help the central government meet its EU agreed deficit targets.

The Catalan government did not provide further details of the bank loan, but a source with knowledge of the deal said the loan would form part of a package to meet the 1.9 billion euros of debt the central government has given the go-ahead for refinancing so far this year.

Catalan savings bank La Caixa, together with Deutsche Bank, Ahorro Corporacion, Natixis and LBBW lead sale of the bonds, with 70% going to Spanish investors, and 30% to non Spanish investors mostly based in Scandinavia.

Other options were being explored to meet the rest of that sum, which could include the launch of a syndicated loan or more bond issues, which would be launched as soon as possible depending on market conditions, the source said.

Catalonia was one of nine regions in Spain that missed their deficit targets last year and needs to refinance around 4.3 billion euros this year according to Reuters service IFR. Catalonia is expecting approval to refinance the rest of its debt in the next few months.

In mid-March Catalonia's new Economy Secretary Albert Carreras told Reuters the region was paying too much to refinance its debt, and would look to carry out roadshows overseas to spur interest in the region.

Catalonia represents around one fifth of the country's gross domestic product and is home to its largest industrial centre.

It signed a one billion euro syndicated loan in July last year led by La Caixa and BBVA.

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