MADRID—Spanish renewable energy and engineering firm Abengoa SA
said on Wednesday that it is filing for preliminary creditor
protection, an initial step that could lead to the largest
bankruptcy case in the country's history.
The potential demise of Abengoa is an extreme example of a
Spanish company whose debt-fueled expansion during the country's
boom years has handicapped its ambitions for growth today.
The company is one of the world's top builders of power lines
transporting energy across Latin America and a top engineering and
construction business, making massive renewable-energy power plants
in places from Kansas to the U.K.
The latest round of Abengoa's negotiations with creditors began
after Spanish investment firm Gonvarri Corporació n Financiera
canceled a plan to inject around €350 million ($372.85 million)
into the Seville, Spain-based company, Abengoa said in a regulatory
filing on Wednesday.
"The company will continue negotiations with creditors with the
goal of reaching an agreement to ensure its financial viability,"
Abengoa said in the filing. A spokeswoman declined to comment
further.
Abengoa shares fell by up to 70% on Wednesday.
The news also hit the shares of Spanish banks, which are among
Abengoa's lenders. Banco Santander SA was down more than 3% in
early afternoon trading in Madrid. The lender has declined to
comment on its exposure to Abengoa. Banco Popular Españ ol SA fell
4.78% and Banco de Sabadell SA fell 3.8%.
Abengoa, whose market value plunged to €300 million on
Wednesday, reported gross financial debt of €8.9 billion in the
third quarter.
That figure swells to €16.9 billion when including €2.1 billion
the company has in what are known as confirming lines—funds it owes
to its suppliers—and €5.9 billion of debt the company has in
subsidiaries it said could potentially be sold, according to José
M. Arroyas, an analyst at Exane BNP Paribas in Madrid.
"Investing now in Abengoa can only be recommended for those with
high risk tolerance," Renta 4 Banco analysts in Madrid wrote in a
research note.
Abengoa now has up to four months to continue talks with
creditors. Under Spanish law, the creditors won't be able to force
bankruptcy proceedings meanwhile.
"We hope that some sort of solution can be found to keep the
company going," said Elvira Rodrí guez, the chairman of Spain's
stock market regulator.
The decision by investment firm Gonvarri to back out of its plan
to inject funds into Abengoa is the latest blow to the company,
which has been desperately trying to raise funds for several months
amid snowballing concerns among investors and analysts about its
solvency.
During much of last year, its shares were snapped up by
investors who were intrigued by Abengoa executives' pledges to
whittle down the debt the company began to amass in Spain's
pre-crisis years.
But earlier this year, investors grew wary, concerned 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 this summer led some to
conclude that Abengoa had less cash on hand than they previously
thought.
In May, Abengoa sold €97.6 million of a buffer of its own shares
known as treasury stock. In July, it borrowed around €275 million
worth of its own stock from its top shareholder.
Abengoa executives said progress on Greece's bailout provided
the impetus to sell its treasury stock, rather than an acute need
for cash. Abengoa's stock-lending agreement with its top
shareholder coincided with the company's decision to buy additional
shares in a capital raising by one of its U.S. units. Abengoa
executives have said the two events were unrelated.
On Aug. 3, Abengoa announced it would raise €650 million in
capital and sell assets to pay down debt and calm concerns about
its liquidity.
Instead, the announcement inflamed investors' worries as it came
three days after Abengoa executives had said the company didn't
need more capital.
Investors and analysts trace Abengoa's current financial trouble
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, spurring some Spanish companies to step up
expansion abroad.
Historically, the company had built power transmission lines,
biofuel plants and desalination infrastructure for clients. During
Spain's boom years, though, it 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.
Earlier this month, Abengoa posted a €194 million net loss for
the January-September period, compared with €100 million net profit
in the same stretch last year. Sales fell 3.8% to €4.87
billion.
"At this juncture, the investment case rests substantially on
the willingness of the banks to give Abengoa new loans," Exane's
Mr. Arroyas wrote in a Nov. 16 report after the company reported
third-quarter results.
Ana Garcà a and Carlos Ló pez Perea in Madrid contributed to
this article.
Write to Jeannette Neumann at jeannette.neumann@wsj.com
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(END) Dow Jones Newswires
November 25, 2015 09:05 ET (14:05 GMT)
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