The Miami Court of Arbitration delivered the sentence on Wednesday which obliges the consortium GUPC, in which Sacyr holds 41%, to returns the advances of 489 M€ which the Panama Canal Authority paid to start the work on the third set of locks. Sacyr has signed a five year syndicated loan, with two years deferral, to cover this payment and has signed a new derivative backed by its 8.1% holding in Repsol for which it has obtained 125 M€ in cash in case of a negative decision in a court in London, where another block of advances to the consortium of 298 M€ is being dealt with.
In any case, the company must face the return of the advance, but has not achieved the delay of payment until all the arbitration decisions about excess costs of the works have been settled. Although the return of the advance will not have a relevant impact in the 2018 results and has in large measure already been discounted, the impact on share price will be negative given that the loan contracted to make the payment will increase the company’s net debts to more than 4.1 billion euros (more than 7X Ebitda 2019) and that this decision increases the probability that the decision in the London court due early in 2019 will also be unfavourable for the company.
This flood of bad news, and the more cautious attitude in the market towards the construction sector because of the global slowdown, leads the analysts at Bankinter to change their recommendation from Buy to Neutral.
The company’s results maintain their solid tendency of recent quarters, after having closed 9M18 with an increase if +20% in income and +37% in Ebitda, thanks to the increase in income from all business, the improvement of the Ebitda margin from 12.1% to 13.8% over the last 12 months and the growing contribution of recurrent income from the Concessions business.
Moreover, the company could benefit in the middle of 2019 from a favourable court decision on the excess costs of cement and basalt of 250 M€ (the courts have already decided favourably in a similar case). However, we believe the share price will be penalised in the short term.