Bankers Trust Corp. wants to bring junk bonds to Spain.
The banking company's London investment banking unit this week lead- managed the first near-leveraged debt issue by a Spanish company. Investor interest in the deal for Tableros de Fribas, or Tafisa, was so high that bankers had to close it out before completing the marketing campaign.
Denominated in pesetas, the roughly $34 million senior floating-rate note due 2005 was issued at par. It has a floating quarterly coupon of 75 basis points over the three-month Madrid interbank offered rate. Mibor is generally within a few basis points of the London interbank offered rate.
To be sure, 75 basis points over the standard benchmark would not qualify the bonds as leveraged in the United States. But it is a very large spread in Spain, where debt issues are usually priced between 12 to 37 basis points over Mibor.
"Although not dramatic by U.S. standards, this is a leveraged transaction by Spanish standards," said Pedro Santaella, the BT Alex. Brown International managing director of debt capital markets for Spain and Portugal who worked on the deal.
Madrid-based Banco Espanol de Credito, known as Banesto, co-lead the deal and acted as paying agent.
For Spain, the privatization sparked by the European monetary union has also left the country ripe for a leveraged bond market, Mr. Santaella said. The next step, bankers said, is to persuade middle-market Spanish businesspeople to use bonds instead of traditional bank loans.
Tafisa is the leading Iberian manufacturer of fiberboard products for the construction, packaging, and furniture industries, and the fourth largest in Europe.
But Tafisa executives have bigger ideas. They plan to use the capital raised in this deal and a $68 million secondary stock issue last year for global expansion. They want to open factories in Canada and Brazil, and extend their European distribution capabilities.
"Although these issues were both small, their purpose was to raise the profile of the company on the international market, so that it can fund expansion in the future," Mr. Santaella said.
The issue was so widely sought after by Spanish regional banks that Bankers Trust canceled the road show promoting it, according to Mr. Santaella. Investors included 11 Spanish banks and five other European banks.
"There is a lot of appetite for the Spanish leveraged credit outside of Spain," Mr. Santaella said. He said the interest is particularly high among British and German investors, who have seen their domestic junk bond markets explode in recent years.
Now Bankers Trust is trying to persuade the Spanish private sector to use this type of debt. Mr. Santaella said he expects about 100 chief financial officers to attend a junk bond seminar Bankers Trust and a Spanish business association are sponsoring in Madrid next week.
Other U.S. investment banking companies will probably also be interested in Spain as a place to manage junk deals, said Martin Fridson, chief high- yield strategist with Merrill Lynch & Co.
"I don't know why anyone would exclude Spain," Mr. Fridson said. "It may be less industrialized than some European countries, but it certainly has enough industrialized companies that would find fixed-rate debt a highly attractive proposition."
Mr. Fridson said several Spanish banks attended London high-yield conferences that he was at last year.
"That's a pretty good sign of interest," he said. "But even if there was no interest by Spanish investors, the investor market is definitely eager for more European issuance."