Abengoa wins creditor approval for restructuring plan

May 2016 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

Heavily indebted Spanish multinational corporation Abengoa S.A. has won support from a number of its creditors to allow it more time to approve a $10.5bn debt restructuring.

According to a regulatory filing made on 28 March, a group of more than 75 percent of the company’s lenders have agreed to continue restructuring talks for a further seven months. The support from creditors has surpassed the 60 percent required for the so called ‘standstill accord’ to come into effect. The accord will essentially put a seven month freeze on all creditors claims; no creditor will be allowed to demand pre-payment from Seville based Abengoa. The decision, though a major step forward, still requires court approval.

Abengoa’s financial issues came to light in November when it filed for preliminary creditor protection, a move which prompted speculation that one of Spain’s biggest firms was on the brink of collapse. The company has been struggling to cope with the large borrowings accumulated in recent years, during a period of rapid expansion. Furthermore, the situation at Abengoa worsened at the end of 2015 when a potential industrial investor walked away from the company.

If the company is declared bankrupt, it would be the largest insolvency in Spanish history. Since the company’s financial difficulties have become known, the value of its stock has fallen by over 70 percent. Earlier in March the company raised $153.6m in emergency loans which will go to paying suppliers and staff wages. The secured term facility agreement is in line with the debt restructuring deal that the company announced on 10 March. Abengoa said it would offer to exchange a controlling 55 percent stake in the company for new loans of up €1.8bn. The company has lined up international investors including Elliott Management Corp, KKR & Co. LP and Oak Hill Advisors LP to anchor the new money facility.

The company’s existing creditors, who will face a 70 percent haircut as part of the restructuring deal, would assume control of 35 percent of the company’s shares by way of compensation. The shareholding of existing equity holders, including the founding Benjumea family, would fall to 5 percent under the company’s new structure. Abengoa will ask investors to commit €800m in new guarantees in return for a 5 percent stake.

Creditor approval will allow the firm to push forward with its plans of carrying out a debt for equity swap. “This is a key step in the restructuring process of Abengoa and will allow the company to complete the financial viability plan that has already been accepted by lenders in order to stabilise business and protect its leadership in the energy and environmental sectors,” the firm said in a statement.

Furthermore, the company – which employs around 29,000 worldwide, and has invested $3bn in the renewable industry in the US – said it would request Chapter 11 bankruptcy filings for all of its US units, and would file for Chapter 15 bankruptcy protection for its non-US registered businesses. Chapter 15 is the section of the US bankruptcy code that deals with cross-border insolvencies. The company hopes that the Chapter 15 filing will provide it with extra breathing room for the ongoing restructuring talks.

“It is my belief that the relief requested in the petition and related motions is necessary… to protect the US assets of the petitioning group members and to prevent creditors from taking actions in the US under US law in a way that could frustrate the group’s efforts to agree a restructuring,” Abengoa’s lawyer, Borja Fernández de Trocóniz, said in court papers documenting the Chapter 15 filing.

Under the terms of the restructuring plan that the company put to creditors in March, the newly restructured Abengoa would cut costs, shed noncore assets and emerge as a slimmer business valued at €5.395bn with €4.9bn in debt.

Richard Summerfield