Abengoa seeks insolvency protection, takes a voyage to the bottom of the bond markets

Abengoa-cover-smIn New York, NASDAQ shares in Abengoa SA plunged 49% in Wednesday trading after the embattled renewable energy developer said it would seek bankruptcy protection as it seeks to reorganize nearly $9.4 billion in debt. The protective filing was announced after an expected infusion of nearly $300 million from Spanish steelmaker Gonvarri did not materialize.

The company’s debt had been previously downgraded to a B3 rating by Moody’s, six rungs on the ladder beneath investment grade. Last week, Moody’s described the company’s cash reserves as “insufficient” and expressed that asset sales and a round of investment by existing backers would not be enough to stabilize the company’s finances.

Abengoa in an SEC filing today stated:

“In relation to the Material Fact (Hecho relevante) of November 6, 2015 (No. 230768) concerning the framework agreement entered into with Gonvarri Corporación Financiera (“Gonvarri”), the Company announces that it has received notice from Gonvarri that the framework agreement is terminated considering that the conditions to which that agreement was subject have not been satisfied.

“The Company will continue negotiations with its creditors with the objective of reaching an agreement that ensures the Company’s financial viability, under the protection of article 5 bis of the Spanish Insolvency Law (Ley Concursal) , which the Company intends to apply for as soon as possible.”

The company did not elaborate on the problems in meeting Gonvarri’s conditions. At the time of the announcement of the proposed investment, which would have made Gonvarri the largest shareholder in Abengoa, the companies said that “the Investment Agreement is subject to certain conditions such as the standby underwriting of the share capital increase by the underwriters announced on September 24th, 2015 continuing to be in force and the signing of a substantial package of financial support in favour of the Company by a group of financial institutions.”

 

The company developed the 25 million gallons cellulosic ethanol facility in Hugoton, Kansas, and is a major operator of ethanol and biodiesel production assets in the US and Europe.

The Digest’s 5-Minute Guide to Abengoa is here.

 

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