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Castilla y Leon to Sell Debt as Rajoy Backs Regions

Source: Bloomberg - Tue 20th Mar 2012
Castilla y Leon to Sell Debt as Rajoy Backs Regions

The Region of Castilla y Leon is selling bonds in the third public transaction by a regional administration in the past week after Prime Minister Mariano Rajoy offered the states loans to help them meet liabilities.

The 2014 bonds issued in euros by Junta de Castilla y Leon may be priced to yield about 210 basis points more than Spanish government bonds, according to a banker involved in the transaction, who declined to be named before the transaction was completed. Aragon and the Madrid region issued debt last week, according to Bloomberg data.

The regions, which control more than a third of public spending, have been locked out of capital markets, forcing them to sell debt to their citizens and leave bills to suppliers unpaid. The central government is offering regions credit lines to help them meet bond redemptions and pay suppliers, a move Moody's Investors Service said yesterday was positive for the states.

Rajoy's government created a credit line of as much as Ä15 billion euros via the Official Credit Institute on Feb. 3, part of which was aimed at helping regions meet bond redemptions. It approved on March 2 another Ä35 billion of loans, mostly through the country's banks, to enable regions and town halls to pay suppliers.

Castilla y Leon, in northern Spain, had a budget deficit of 2.35% of GDP last year, compared with a target of 1.3% for all 17 states and an average of 2.94%. Madrid's shortfall was 1.13% and Aragon's was 2.88%, according to government data.

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