The economic crisis stemming from the coronaviral pandemic is testing business liquidity circles. The shorter-term debt, the promissory notes, was demonized in the first moments of the Great Confinement, but now it is one of the most used tools by Spanish companies to raise cash. Endesa, Aena and Telefónica have close to 2,000 million euros in circulation of this paper. They have shot up the amount close to 80% compared to the end of 2019, according to data from BME Renta Fija. The ECB, which is buying this type of debt, is key.

No company is in a position to neglect funding sources. Spanish companies sharpen their weapons in case the situation of economic paralysis lengthens. They have already come out with classic bond issues, have negotiated syndicated loans, bilateral loans and are also making maximum use of short-term debt with maturities of between three days and two years.

The teleco, the utility and the airport manager have programs registered in Spain. And the data reveals that the teleco has launched to use it in a massive way. It has 400 million paper in circulation, compared to the 75 with which it concluded last year. The maximum forecast in principle is 500 million, although the company keeps the ace up its sleeve to stretch it to 2,000 million.

The energy company chaired by José Bogas has preferred to cover his back and has recently increased his emission cap from 3,000 to 4,000 million euros. Now he is using around a quarter of his capacity, but he has preferred to leave himself a margin.

Aena has 375 million in outstanding promissory notes, when it has margin to issue up to 900. Financial sources indicate that the company, controlled by the state that maintains 51% of the capital, will continue to squeeze this financing formula, regardless of whether there is already signed credits for almost 2,000 million euros with various financial entities in bilateral loans.

IOUs are now a vault key to business financing. Curiously, in the Great Financial Crisis that started 12 years ago, it was banks that resorted to this instrument. But for very different reasons. Thus, entities thus avoided having to pay a part to the Deposit Guarantee Fund (FGD). Now, Lagarde’s magic wand has touched promissory notes, but only those of companies, the most direct tool to obtain liquidity. Banks have unlimited liquidity through auctions.

Until Lagarde acted, the Central Bank could buy debt with a minimum residual maturity of six months; now it’s 70 days. In fact, the promissory note market was the first debt market to catch on. In the early days of distress, investors rejected this role: maturities couldn’t even be refinanced.

But the anti-pandemic bazooka, with which the Central Bank has already bought debt of all kinds for 153,000 million, has taken effect. Now he intervenes with direct aid. And not only in the secondary market, as it does with sovereign bonds, but it buys directly from the issuer. “It is money in the vein for companies,” says the head of the capital market of a Spanish bank.

Iberdrola, Repsol, Red Eléctrica, Ferrovial, Naturgy, Abertis, ACS, Amadeus, Cellnex, Colonial and Viesgo also have promissory note issuance programs outside Spain, although they are equally valid when they are selected to swell the ECB’s balance . These 11 firms, with a minimum rating of BBB-, have margin to issue promissory notes for a total of 11.1 billion in Luxembourg, Ireland and the Netherlands.

Waiting for intervention at MARF

The ICO. The public bank will shield 70% of the issues in the Alternative Fixed Income Market (MARF). The maximum amount will be 4,000 million, so the maximum amount that can be placed will be close to 6,000 million. The entity also has permission to buy the notes directly from the issuer, in the image and likeness of what the ECB does. It will have the capacity to invest up to around 50% of the amount placed, as CincoDías published on May 11.


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