Abengoa on verge of largest bankruptcy filing in Spanish history

Spanish renewable energy company Abengoa on Thursday applied for preliminary protection from creditors and called in lenders to start negotiating the terms of an agreement that would prevent a definitive suspension of payments.

In accordance with Spanish insolvency laws, the company has four months to reach an out-of-court agreement with its creditors.

Abengoa is on its way to becoming the biggest bankruptcy case in Spanish business history – even bigger than the fall of real estate giant Martinsa-Fadesa.

Right now, the company needs a white knight”

Stuart Stanley, Invesco Asset Management

While the Seville-based firm desperately seeks a new deal with its creditors or a new investor to shoulder part of its €8.9 billion of gross financial debt, it is also asking bondholders to group together into a committee to renogotiate the debt.

“The committee is necessary in order to manage our commitments in an efficient manner,” said a company spokesperson.

Meanwhile, shares in the renewable energy and engineering giant continued to plunge, registering losses of up to 25 percent on Thursday – its last day of trading after the Ibex 35’s technical committee decided to take Abengoa out of the blue-chip index.

“Many bondholders are now selling,” confirmed Stuart Stanley, of Invesco Asset Management. “If nobody is willing to intensify their positions, then who’s going to help Abengoa? Right now, the company needs a white knight.”

On Wednesday, the company informed the United States stockmarket watchdog, the Securities and Exchange Commission (SEC), that Javier Garoz, head of the US unit, was leaving the group.

Abengoa, which is made up of around 650 businesses, did not explain the reasons for Garoz’s departure.

Creditors are now faced with the unpleasant choice of selling at a loss or waiting for a negotiation at eventual liquidation talks.

Meanwhile, Spanish Industry Minister José Manuel Soria said on Thursday that he hoped Abengoa would be able to save itself, but noted that it is a private company.

“The government is closely following all steps being taken, but the case affects a company from the private sector, since the government is not in the position of the National Industry Institute, in which the state could inject capital into this and that company,” said Soria in an interview with state broadcaster TVE.

Soria called Abengoa “a business of reference in Spain” in the field of renewable energy. The company has a workforce of 27,000 employees and three quarters of its business is conducted outside Spain.

Employment Minister Fátima Báñez on Thursday guaranteed that the government would help seek a solution “with a future” for Abengoa and called on all parties involved to “negotiate and dialogue to the point of exhaustion.”

Báñez said that the government “wants to help with that dialogue” and called Abengoa a “very important company, not just because of the number of workers but also because it is one of the most innovative businesses in our territory.”

English version by Susana Urra.