• Plan to raise 650 million euros needs shareholder approval
  • Most bonds are still quoted below 60 percent of face value

Abengoa SA’s investors are unconvinced that even a successful capital increase will fix the company’s finances.

Most of the Spanish renewable energy company’s bonds remained below 60 percent of face value after Abengoa said banks agreed to underwrite a planned share sale. Its 500 million euros of notes due March 2021 rose 15 cents on the euro to 51 cents, according to data compiled by Bloomberg.

Abengoa said it scheduled a shareholder meeting to approve a sale of at least 650 million euros ($731 million) of new stock and that its Chairman Felipe Benjumea, who led the company for 25 years, will leave the board. Investors are concerned the deal, which was announced in the middle of the night after weeks of uncertainty, may not be enough to manage more than 6.5 billion euros of consolidated net debt.

“The rights issue is a first step in the right direction but it’s not a complete solution,” said Louis Gargour, chief investment officer of London-based LNG Capital, an alternative investment-management firm which holds some Abengoa bonds. “The company requires access to capital markets and ongoing financing. If that proves difficult, Abengoa may still need a restructuring at some point.”

Funding Needs

The company’s strategy addresses its funding needs, Chief Executive Officer Santiago Seage said in conference call with investors today. 

Abengoa is also selling assets to cut debt and bolster its cash position after cutting guidance for free cash flow this year. The Seville-based company has been working with Lazard Ltd. to find investors for the capital increase and may consider a debt restructuring, Bloomberg reported on Sept. 4.

Abengoa’s 500 million euros of bonds due in March rose 30 cents on the euro to 89 cents after the company said it would prepay most of them this year, according to data compiled by Bloomberg.

“This is a bridge to next year,” said Antoine Bourgault, London-based head of credit research at ISM Capital LLP. “But if asset sales do not proceed as planned or working capital lines get reduced, there could still be a liquidity problem late next year or early 2017.”

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