Spain pulled the initial public offering of its lottery operator because of market conditions, depriving the deficit-laden nation of revenue to reduce this year’s bond issuance.
Spain’s Finance Ministry said it postponed the sale of the 30 percent stake in Sociedad Estatal Loterias & Apuestas del Estado SA as market conditions don’t “guarantee revenues that reflect the value” of the operator.
The IPO was slated to raise as much as 7 billion euros ($9.5 billion), a person with knowledge of the deal said Sept. 19, which would have made it the biggest state-asset sale in Spain’s history.
Spain’s Ibex-35 stock market index has lost 14 percent this year as the nation’s borrowing costs surged to euro-era records amid increasing expectations of a Greek default that may spread contagion through the region. Axing the deal may increase the amount of debt Spain needs to issue to finance the euro region’s third-largest budget deficit.
Spain has one bond redemption left this year of 14 billion euros, and expiring bills worth about 23 billion euros, according to data from the Treasury in Madrid. Government data show it had 40 billion euros in cash at the Bank of Spain at the end of June.
Spain pays more than 5 percent a year to finance itself for 10 years, even after the European Central Bank began buying its debt in August on the secondary market. The extra yield over German securities narrowed to 307 basis points today.
At least 24 new stock sales were postponed or canceled in western Europe this year, almost twice as many as a year earlier, according to data compiled by Bloomberg. Investors are shunning IPOs as concerns over burgeoning European sovereign debt pushed the benchmark Stoxx Europe 600 Index to near its lowest level in two years.
Loterias, operating for nearly 250 years in the world’s fourth-largest lottery market, had 2.6 billion euros of profit in 2010, according to the annual report. Goldman Sachs Group Inc., JPMorgan Chase & Co., UBS AG, Credit Suisse Group AG, Banco Bilbao Vizcaya Argentaria SA and Banco Santander SA are lead managers for the IPO, Loterias said in July.