ACS avoids guarantees on its Iberdrola stock after refinancing from SG

MADRID | ACS reported that Société Général has agreed to refinance part of the debt of its 8.25 percent acquisition of Iberdrola. The transaction, signed by ACS’ subsidiary Residencial Montecarmelo, allows to substitute the loan currently held with a syndicate of banks, in which BBVA acted as agent. The operation accounts for €1.6 billion and will leave ACS with a 6.6 percent stake in Iberdrola, that is, ACS will still be the main shareholder over Qatar’s sovereign fund (6.2 percent), Kutxabank (5.5 percent) and Bankia (5.4 percent).

On Monday, most investor notes in Madrid welcomed the deal. Banesto Bolsa and Link analysts remarked that the transaction has limited the exposure to Iberdrola share price drops, which were set to trigger the requirement of further guarantees.

Some research firms in the financial City of Madrid, like Nordkapp, believed this condition posed a risk to the already crisis-battered balance sheet of ACS. Nordkapp said the accord with the French bank could be seen as a hire-purchase, too. The refinancing has been signed for a period of three years, the company explained.

“At the end of this period, ACS will decide the future steps of its investment in Iberdrola.

“The new agreement includes the subscription of certain derivative instruments and a stock loan agreement on Iberdrola shares, which eliminates the need to provide additional guarantees in the case of an Iberdrola share price reduction from the current levels,” ACS confirmed.

This process is “a fundamental step” in the execution of Grupo ACS’s corporate strategy, the company said, adding it is carrying out a “rigorous financial plan” to reduce debt and to eliminate the requirements of additional guarantees on its financial structure.

Grupo ACS’s cash flow generation capacity was in the first quarter of 2012 of €664 million and net profit from the operating activities in the same period amounted to €209 million.

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