Portugal Issues 110 Million Euros Private Placement

Portugal Issues 110 Million Euros in 2011’s Third Private Sale

Jan. 19 (Bloomberg) — Portugal sold 110 million euros ($148 million) of floating-rate notes in its third private placement of the year, tapping an alternative source of funding as jitters about Europe’s sovereign-debt crisis persist.

Portugal, which aims to borrow 20 billion euros this year, today issued notes due January 2013 paying an initial coupon of 170 basis points over Euribor, according to data compiled by Bloomberg. The sale follows private placements of 1 billion euros of 2 1/2-year notes on Jan. 7 and 50 million euros of 2021 floating-rate notes on Jan. 10.

The southern European nation also auctioned short-term bills today. Portugal auctioned 2014 and 2020 bonds on Jan. 12, and traders said then that the European Central Bank had previously bought the nation’s debt to ensure a successful sale and restrain yields. Messages left for Sofia Torres, head of the debt-management department at the Portugal’s debt agency, weren’t immediately returned.

“Normally a private placement is done when certain investors with particular requirements approach a debt agency for tailor-made issuance,” said Luca Cazzulani, a senior fixed- income strategist at UniCredit SpA in Milan. Regular use of placements “could backfire and give a wrong message to the market that the government has difficulty raising money through a regular channel, such as auction or syndication. That’s a risk Portugal may have to be mindful of.”

Portugal has the euro-region’s fourth-largest budget deficit behind Ireland and Greece, both of which stopped raising debt through bond markets last year and turned to the European Union and the International Monetary Fund for bailouts after borrowing costs became unsustainable.

Today’s Sales

The EU is working on increasing the size of its financial backstop as Portugal tries to convince markets it doesn’t need aid. The ECB has declined to comment on its bond purchases.

Credit Agricole led today’s placement. The coupon on the debt sold today will rise to 290 basis points in 2012, and investors have the right to sell them back to the government quarterly from July 2011, data show.

The nation’s borrowing costs fell and demand rose at a sale of 750 million euros of 12-month bills today. The yield fell to 4.029 percent from 5.281 percent, the highest in more than five years, at a sale of similar maturity securities on Dec. 1, the country’s debt agency said. Investors bid for 3.1 times the amount of bills offered, more than the 2.5 times in December.

“Our commitment is to fund ourselves through the market, be it auctions or syndications,” Albert Soares, chairman of the Portuguese debt agency, said in a Jan. 14 interview. “Private placements are transactions that we analyze on the opportunistic basis. We consider each one according to its own merit.”

Portugal will also use very short-term financing instruments, such as repurchase agreements, credit facilities, and commercial paper, the debt agency said when it announces its 2011 financing program last month.

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