Bloomberg News

Catalonia Sells Bonds to Citizens as Market Access Squeezed

October 06, 2011

(Updates with figures starting in second paragraph.)

Oct. 6 (Bloomberg) -- Catalonia, Spain’s largest and second-most indebted region, is preparing to sell as much as 4 billion euros ($5.4 billion) of bonds to its citizens as it remains shut out of public debt markets.

Catalonia will sell 3 billion euros of the one- and two- year bonds, extendable to 4 billion euros, the region’s economy department said in an e-mailed statement today. It is the third issue of debt to retail investors and coincides with the redemption of the first so-called patriot bond issued last year.

The one-year debt will have a coupon of 4.75 percent, rising to 5.25 percent for the two-year securities, and the banks will earn a commission of 2 percent to 2.2 percent. The issue will be lead by CaixaBank, CatalunyaCaixa and Banco de Sabadell SA.

The region, which has an economy the size of Portugal’s, hasn’t sold bonds in public debt markets since March, according to data compiled by Bloomberg. The region is slashing spending and trying to sell assets including the Barcelona stock-market building to rein in its budget deficit, which was the fourth- largest in Spain last year.

Spain’s regions, which control health and education, have racked up record amounts of debt during the crisis amid a slump in real-estate tax revenue, and together owe 133 billion euros, more than twice what they did in 2007, according to the Bank of Spain. The 17 states are falling behind on their bills, and the pharmaceutical lobby is in negotiations to securitize 5.4 billion euros of their unpaid drug bills, Farmaindustria Director General Humberto Arnes said on Oct. 4.

Regional governments including Catalonia, which was downgraded by Fitch Ratings on Sept. 14, are also suffering from a surge in borrowing costs as Spain’s sovereign-debt costs rise. Spain pays around 5 percent to borrow for 10 years, putting the extra yield over equivalent German securities at 312 basis points, compared with an average of 15 basis points in the first decade of monetary union.

--Editors: Andrew Davis, Jeffrey Donovan

To contact the reporter on this story: Emma Ross-Thomas in Madrid at

To contact the editor responsible for this story: Craig Stirling at

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