Abengoa Banks Said to Agree Initial Terms for Loan to Pay Bills

Abengoa SA creditors, including Banco Santander SA and HSBC Holdings Plc, have reached a preliminary agreement to provide the distressed renewable-energy company a 113 million-euro ($122 million) credit line to pay wages and suppliers through the end of the year.

The final deal is expected to be signed early next week, according to two people familiar with the talks, who asked not to be identified because they’re not authorized to speak publicly. The banks’ risk committees still have to approve the loan, the people said. Spanish news website El Confidencial reported the agreement earlier Friday.

Talks with banks began after Seville-based Abengoa, which has 8.9 billion euros of gross debt, filed for preliminary creditor protection on Nov. 25. While the company has until the end of March to reach an agreement with creditors under Spanish bankruptcy law, failure to obtain funding may force it into insolvency proceedings sooner.

“It appears Abengoa will not enter into insolvency in 2015,” Felix Fischer, a credit analyst at independent research provider Lucror Analytics in Singapore, wrote in a note to clients on Thursday. “It may prove challenging to obtain further funding in 2016 and an insolvency is a distinct possibility.”

The deal consists of a 93 million-euro loan, while government lender Instituto de Credito Oficial, has been asked to provide a 20 million-euro credit line, the people said. 

Officials at Santander, ICO, HSBC and Abengoa declined to comment on the loan.

Debt Map

The deal gives Abengoa more time to negotiate with lenders as it works on a restructuring plan with its adviser Alvarez & Marsal, the company said earlier this month. Abengoa has also agreed with its main creditors and their adviser, auditing firm KPMG, to work on creating a map of its debt.

Abengoa is planning to sell assets valued at between 2.5 billion euros and 3 billion euros, said a separate person familiar with the plan. The company expects to raise as much as 1.5 billion euros from the sales, the person said.

The company wants to focus on its engineering and construction businesses and sell assets in units such as Abengoa Solar, Abengoa Bionergia and Abengoa Yield Plc, the person said. As part of the plan, Abengoa will reduce costs by as much as 40 percent, according to the person. Expansion newspaper reported the plans earlier Friday.

Before it's here, it's on the Bloomberg Terminal.