Spanish companies look beyond euro for financing options

Ingenuity is a strong ally during times of crisis. Spanish companies are showing this trait during the onset of 2012, as they did during the past year, when it comes to getting financing. With credit outlets closed off and the sovereign debt crisis making it difficult to get financing in euros, companies are understanding how just as diversifying earnings geographically acts as a shield from risk, widening financing sources is similarly advisable. To do so, they are breaking borders and issuing debt in currencies other than the euro.

During the first few weeks of the year, two Spanish companies have already issued debt in non-euro currencies. Iberdrola, an electric company, issued 250 million in Swiss francs (around 207 million euros) and the gambling company Codere sold 300 million dollars in debt (around 230 million euros).

Fernando García, director of Corporate Bonds for Société Générale CIB in Spain and Portugal, said that issuing debt in other currencies could correspond to "a strategy of market diversification that does not depend on a single currency." He also mentioned two more reasons. First, "there is a need to have hard money in this market." The second reason related to foreign exchange financial strategy, because it involves exchanging foreign debt for euros. For example, at this time it is strategic to generate "arbitrage opportunities by issuing debt in dollars now in order to exchange them for euros later."

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When it comes to diversifying financing sources, Iberdrola is already a veteran. In the past few years it has been issuing debt in foreign currencies. The company placed 350 million pounds of 15-year debt through ScottishPowerDistribution July 2011, one billion dollars in 2010 and 5 billion yen in November 2010. Iberdrola did not wait long to apply this strategy, and on January 25 issued 250 million of five-year bonds in Swiss francs.

Sources from Iberdrola point out that this policy has allowed the company to "continue building on the strength of the company's financial structure." At the end of the third quarter, the company showed 9.6 billion euros in liquidity, an amount that "allows the company to address its financing needs for the next 24 months."