Abengoa Said to Plan Shrinking by 30% to Avoid Insolvency

  • Banks and creditors will consider restructuring proposal
  • Spanish company would retain units focused on solar, water

Abengoa SA, the Spanish renewable energy firm fighting to avoid bankruptcy,  plans to shrink itself by about a third under a business plan aimed at convincing creditors it can survive as a smaller company, according to a person familiar with the matter.

The company will reduce revenue by about 30 percent from the 7.15 billion euros ($7.80 billion) it recorded in 2014 while also paring back its geographic reach as part of a viability plan to be presented to banks and creditors, according to the person, who asked not to be named because the decision hasn’t been made public. The company is also seeking to divest assets without selling its largest subsidiaries, the person said.

Abengoa last month received a 106 million euro credit-line from banks to help it get it through the end of the year. It’s working with auditors and financial advisers, including KPMG and Alvarez & Marsal, on mapping its debt and outlining a recovery plan. Abengoa filed for preliminary debt protection on Nov. 25, which gave it a four-month window to avoid insolvency by reaching an agreement with creditors.

Both KPMG, which is working with the banks, and Alvarez & Marsal, working for Abengoa, have concluded that the company needs less than 100 million euros per month in credit-lines for the first quarter, the person said.

A spokesperson for Abengoa declined to comment.

Abengoa Class B shares, the most traded, dropped 6.5 percent to 20 cents to the euro at 10:07 p.m. in Madrid trading.

Under the divestment program, Abengoa will seek to hold on to units including Abengoa Solar and Abengoa Water, even though it may sell assets from the units. Retaining the units would allow Abengoa to preserve ownership of its technology and to keep developing projects with higher profit margins than in enjoys from installing projects, according to the person.

The company will be open to selling Abengoa Bionenergia because making biofuels isn’t part of the company’s core business, the person said. Any sale would hinge on the sorts of offers Abengoa could attract for the unit, the person said.

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