Spain Said to Plan Lottery Bonds for Regional Bailouts

Spain Said to Plan Lottery Bonds for Local Government Bailouts
Catalonia, the country’s largest region, Valencia and Andalusia are among semi-autonomous governments seeking bailouts after being shut out of international capital markets. Photographer: Stefano Buonamici/Bloomberg

Spain is planning to sell bonds through its state-run lottery operator to help fund the bailouts of regional governments, according to two people familiar with the matter.

The issue will be part of a 6 billion-euro ($7.8 billion) financing through Sociedad Estatal Loterias & Apuestas del Estado SA, which is also raising a syndicated loan, the people said. The central government in Madrid is putting together an 18 billion-euro rescue fund for local authorities.

Catalonia, the country’s largest region, Valencia and Andalusia are among semi-autonomous governments seeking bailouts after being shut out of international capital markets. Funds will only be available in return for budget cuts, according to Economy Minister Luis de Guindos.

“Loterias will be able to access cash at good rates, given its stable revenues,” said Ciaran O’Hagan, head of European rates strategy at Societe Generale SA in Paris. It will also help “reduce pressure on banks already exposed to Spanish credit.”

The new bonds will be used to refinance at least part of the loan, the people said. The proceeds from the lottery financing will be added to 8 billion euros of debt the government is raising from the country’s banks, and 4 billion euros from treasury cash.

Details of the financing haven’t been completed, according to a Madrid-based Loterias official, who asked not to be named citing company policy. Officials at Spain’s budget ministry didn’t respond to requests for comment.

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