Abengoa Signs Debt Deal to Avoid Spain's Largest Insolvency

  • Creditors to provide $2 billion loan in return for 55% stake
  • Founding family and other shareholders to be left with 5%

Abengoa SA announced a debt-restructuring agreement, bolstering efforts to avoid becoming Spain’s largest corporate insolvency.

The renewable-energy company plans to give creditors a 55 percent stake in return for as much as 1.8 billion euros ($2 billion) in loans, it said in a regulatory filing on Thursday. The loans will be secured against assets including shares in affiliate Abengoa Yield Plc, which owns and operates power plants.

Bonds issued by Seville, Spain-based Abengoa rose after the accord, which may give management time for corporate overhaul that entails paring global operations, shedding assets and refocusing on engineering and construction. The company filed for preliminary creditor protection in November, with 9.4 billion euros of gross debt, after failing to raise funds from shareholders.

“The plan is a step in the right direction,” said Felipe Villarroel, a London-based money manager at TwentyFour Asset Management, which oversees 5.5 billion pounds ($7.8 billion). “It looks like the probability of a liquidation has decreased, but still it’s not a done deal.”

Creditors will swap 70 percent of Abengoa’s existing debt for a 35 percent stake in the company. Abengoa will also seek investors to provide 800 million euros in new guarantees in return for a 5 percent stake. 

Under Spanish law, Abengoa needs to present a restructuring plan to a court to avoid insolvency proceedings. Any deal also has to be approved by at least 75 percent of creditors.

Abengoa bonds due March 31 rose for a fifth day to 18 cents on the euro, according to data compiled by Bloomberg. They’ve climbed about 6 cents this month. The company’s Class B shares slumped 18 percent in Madrid trading to 0.26 euros. They’ve tumbled 92 percent in the past year.

Existing Abengoa shareholders will be left with 5 percent of the restructured company. That includes Inversion Corporativa IC SA, Abengoa’s parent, which is owned by the founding Benjumea family. The stake may rise to as high as 10 percent, if loans are repaid within five years, the filing said.

Abengoa reported a 1.2 billion-euro loss for 2015, after a 125.3 million profit a year earlier. The company ran in trouble because of cash shortages following a global expansion drive. It last week replaced its chairman and ended an advisory contract with Felipe Benjumea, the son of the company’s founder. Benjumea also served as chairman for more than 20 years before stepping down in September.

Abengoa Yield is rebranding as Atlantica Yield.

Abengoa bond investors, including BlackRock Inc., Centerbridge Partners and Varde Partners, are advised by Houlihan Lokey Inc. and Clifford Chance. Bank lenders, including Banco Santander SA and HSBC Holdings Plc, are advised by KPMG and law firm Uria Menendez. Abengoa is advised by Lazard Ltd. and Alvarez & Marsal.

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