The demise of Abengoa, the Spanish engineering and renewable energy firm, would have been a massive blow for its creditor banks.
So the government and the banks have been working on a solution since the company entered pre-insolvency proceedings. And in principle, the result is the agreement reached this week between the creditor banks and the bondholders to refinance the company.
The deal, which hands over the majority of Abengoa’s capital to its creditors, has to be endorsed before March 28th by creditors holding at least 75% of the firm’s debt, according to the law. Then the company must give its agreement.
The plan includes opening up €1.200 billion of credit lines for Abengoa, as well as renewing the express loans granted by the banks and bondholders in the past few months.
The current shareholders will keep 5% of the new Abengoa. The Benjumea family, responsible for the company’s bad management, will only get 2.5%, although their intention was to obtain 12.5%.
But the banks rejected Benjumea’s plan and the family has had to content itself with a smaller stake in the company.
Abengoa’s shares plunged more than 15% before the agreement was announced, although they have accumulated a 145% gain over the last three sessions. Another example of speculators trading with insider knowledge.
Under the terms of this agreement, banks and bondholders would receive 40% of the new Abengoa, as well as accept a 70% haircut on the group’s corporate debt of about 9 billion euros.
Better to agree to a debt acquittance, even if it’s a large one, than lose everything. Santander is the bank with the greatest exposure to Abengoa (1.550 billion euros) and is the most interested in sealing the deal.
Before filing for preliminary bankruptcy protection, Abengoa was a company with annual revenues of 7 billion euros and 24,000 employees worldwide. According to experts consulted on the matter, the firm’s management has been a complete disaster of late: a case of leveraging and more leveraging.
In light of these events, the Association of Suppliers and Subcontractors of the Abengoa SA group (Aprosab) believes the agreement reached between the banks, the so-called G-7, and the main bondholders to restructure debt and recapitalise the company is “positive.” That said, the association acknowledges that the plan “is nevertheless traumatic for everyone involved.”