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Abengoa survives bankruptcy with new deal

Renewable energy and engineering company Abengoa SA said it had reached a restructuring deal with its creditors to avoid becoming Spain’s largest-ever bankruptcy

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Renewable energy and engineering company Abengoa SA said it had reached a restructuring deal with its creditors to avoid becoming Spain’s largest-ever bankruptcy.

A group of investors including Centerbridge Partners LP, Elliott Management Corp. and Oaktree Capital Management LP have agreed to inject €1.17 billion ($1.31 billion) into the debt-laden company, Abengoa said in a regulatory filing last week. Abengoa will also receive €307 million in financial guarantees, according to the filing.

In exchange, investors and creditor banks, such as Spanish lenders Banco Santander SA and Banco Popular Español SA, are set to own between 90% and 95% of Abengoa, depending on whether Abengoa meets certain targets.

Abengoa didn’t clarify whether 75% of creditors had agreed to the restructuring deal, as required by Spanish bankruptcy law. The Seville, Spain-based company said it plans to hold a telephone conference with investors and analysts on Aug. 16 at noon EDT to provide further details.

The renewable energy company has been negotiating with creditors since November to avoid becoming Spain’s largest bankruptcy, after years of debt-fueled expansion during the country’s boom years.

Abengoa has been among the top builders of power lines transporting energy across Latin America and a top engineering and construction business, manufacturing massive renewable-energy power plants in places from Kansas to the U.K.

But last year, investors grew wary about how much cash Abengoa had to manage its debt pile. While the company’s debt load was nothing new for investors and analysts who had been monitoring the company for years, moves last summer led some investors to conclude that Abengoa had less cash on hand than they thought.

Investors and analysts trace Abengoa’s current financial difficulties to a shift in strategy during Spain’s property boom, which started to gain momentum around 2004. The country’s banks eased borrowing requirements for companies, which helped trigger an infectious corporate optimism that spurred some Spanish firms to step up expansion abroad.

From its inception, Abengoa built power transmission lines, biofuel plants and desalination infrastructure for clients. During Spain’s boom years, the company began to construct such projects for itself, fueled by cheaper bank loans and a desire to expand. The company took on piles of debt in anticipation of a growth rate that never materialized.

In Madrid trading Thursday, Abengoa’s shares fell 2.2% to 67 euro cents (75 U.S. cents).

WSJ

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