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Spanish companies scramble to issue debt

Source: Reuters - Mon 10th Sep 2012
Spanish companies scramble to issue debt

Spanish firms are dashing into the bond market, taking advantage of a fall in interest rates after the ECB pledged action to reduce the country's financing costs, and eager to move quickly in case the situation deteriorates again.

Power firm Gas Natural raised 800 million through a 7-year bond with a 6% coupon on Monday while peer Iberdrola sold 750 million in a 5-year bond, testing investor appetite after Telefonica's successful bond issue last week.

BBVA, Spain's second largest bank, sold 1.5 billion of a 3-year bond with a 4.375% coupon on Monday, following a stellar issue by peer Santander on Friday.

Bank Banesto sold 500 million of a 2017 bond with a 4.75% coupon. Rival Sabadell has mandated an issue of 2-year mortgage-backed securities at mid-swaps plus 375 basis points, a source told IFR, a Thomson Reuters news and markets analysis service.

Other Spanish companies could follow suit shortly, debt traders said.

Spain's corporate bond markets have been frozen for months, taking their cue from the sovereign debt market where rates on Spain's 10-year bond reached a peak of more than 7% in July.

That level, seen by investors as unsustainable, has dropped since ECB President Mario Draghi announced an unlimited bond-buying programme to bring relief to troubled euro zone countries.

"It's not just that costs have come down, there's also more willingness to buy corporate debt as shown by Telefonica last week ... and we could see more corporations joining the trend in the next few days," a Spanish debt trader said.

Telefonica issued 750 million in 5-year bonds on last Wednesday, joining other companies based in peripheral European economies to break an issuance freeze thanks to improving credit conditions.

The former Spanish monopoly, struggling with a dismal home market and a 57 billion debt pile, set a 5.811% coupon on the Sept. 5, 2017 bonds.

"The companies are taking advantage to improve their liquidity risk, which had increased considerably in recent months," another debt trader said.

"I think we're going to see more issuances especially if today's deals are closed successfully, which is how it's looking now," he said.

The yield on Spain's benchmark 10-year sovereign bond hit a 5-month low on Monday, with investor sentiment buoyed by ECB bond-buying plans.

However, further falls were seen capped by uncertainty over when Madrid would seek aid to trigger the scheme, propelling Spanish companies to hit the bond market before it was too late.

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