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Bankia’s Planned Senior Bond Sale Seen as Bailout Comeback

Updated on

Jan. 8 (Bloomberg) -- Bankia SA, the Spanish lender whose real estate losses forced the government to seek a 41.3 billion-euro ($56 billion) European rescue for its banking system, is returning to the market with its first sale of senior debt.

Bankia has hired Bank of America Corp., Commerzbank AG, Natixis and UBS AG to arrange a sale of five-year unsecured bonds in euros, according to a person with knowledge of the matter, who asked not to be identified because he’s not authorized to speak about it.

“The uninvestable has become investable,” said Simon Maughan, the head of research at Olivetree Financial Group in London. “Bankia was born with vast problems and this is a tentative step away from all that.”

Formed in 2010 from a merger of seven former savings banks, the Valencia-based lender became a symbol of Spain’s banking crisis after mounting writedowns caused it to post the country’s biggest ever corporate loss. After transferring 22.3 billion euros of soured property assets into a bad bank, the group is seeking to generate more revenue by selling assets and cutting jobs.

Another bailed out Spanish bank in the bond market is Banco Mare Nostrum SA. The Madrid-based lender, which received 730 million euros in European aid, raised 500 million euros from a sale of five-year covered bonds today, according to data compiled by Bloomberg.

Yield Drop

The average yield investors demand to hold bonds from financial companies in Spain and other nations from Europe’s periphery fell to a record, dropping 9 basis points in the past week to 2.62 percent, according to Bank of America Merrill Lynch index data.

Spain’s borrowing costs have also fallen to an all-time low, with the yield on the government’s five-year bonds dropping to 2.3 percent from a peak of 7.6 percent in July 2012, according to Bloomberg generic prices.

The improved financing terms is fueling a stock rally, according to Maughan. Shares in Banco Popular Espanol SA have risen 23 percent this year while CaixaBank SA is up 13 percent, Bloomberg prices show.

Bankia shares fell 0.6 percent to 1.263 euros in Madrid today.

To contact the reporters on this story: Charles Penty in Madrid at cpenty@bloomberg.net; Hannah Benjamin in London at hbenjamin1@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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