Iberia's troublesome float

The state is selling its remaining 54% interest

Institutional demand for shares in Iberia, Spain's national airline, has been practically non-existent.

We are seeing no interest at the current price range at all among institutional investors

Syndicate source

In Spain's last major scheduled privatisation, the State Industrial Holdings Company is trying to sell its 53.9% share in Iberia.

A cut-price flotation is now increasingly likely, and inside sources say the state is willing to lower its asking price in order to ditch the airline.

"We are seeing no interest at the current price range at all among institutional investors," said a source within the syndicate group.

Alternative options

"They can do two things: stop the deal or lower the price. At this point I think the latter option is more recommended," said an analyst.

Facts of the Deal

April sale date

492m shares

25% to 35% of shares earmarked for international investors

A decision to delay the float can be taken up to 1 April.

The state could also opt to shift more shares into the retail sector of the offer if institutional buyers remain unconvinced.

The float will see 492 million shares sold, mainly to international investors.

The shares were offered between 1.71 and 2.14 euros, valuing the whole airline between 1.56 and 1.95 bn euros.

Analysts now believe that this price could be slashed to a share price between 1.1 and 1.5 euros.

Iberia's valuation has already been cut from about 2.8 bn euros in 1999, when a 40% stake was sold to investors including British Airways and American Airlines.

Postponed

The state has been looking to sell-off the airline ever since plans to acquire rival Air Europa fell through.

The offering has been delayed by opposition from pilots, adverse economic conditions and failed acquisition talks.

The successive delays have not helped the flotation as stock market conditions have become much more difficult.