It Didn’t Take Long: Abengoa Is Back At It

How to prevent its shares from dropping below €0.01?

By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.

Abengoa, the Spanish green energy giant — with big entities in the US, Canada, Mexico, and other countries — famed for cooking its books with Enron-esque aplomb before collapsing in spectacular fashion a few years ago, is back in trouble.

Now, just two years after rising from the ashes of its monstrous debt pile, the company has purportedly asked its long-term advisor, Lazard, to set up a new agreement with creditors as it struggles to repay €142 million of outstanding debt to “holdout” bondholders, who refused to accept the terms of a 2016 restructuring deal.

Abengoa had assured its investors that it would reach an agreement with the holdout bondholders by May 31. But that date came, went and nothing happened. Abengoa then asked for a waiver to give it more time to reach a new agreement. The main sticking point appears to be that many of the investors that agreed to take massive haircuts in Abengoa’s 2016 debt restructuring are now smarting from the fact that the holdout bondholders that took Abengoa to court and won are now getting what they see as more favorable treatment.

For many of the company’s original creditors, it appeared to make more sense to agree to a haircut, even a very large one, than to lose everything they were owed. The list of creditors is exhaustive and includes many of Spain’s banks as well as international giants like Credit Agricole, Societe Generale, Natixis, HSBC, Bank of America, and Citibank.

Spain’s biggest bank, Santander had the greatest exposure to Abengoa (€1.6 billion) and was most interested in sealing the 2016 deal. It now holds around 5% of the group, making it the largest shareholder. The second largest is the Spanish government, which ever-so-quietly and ever-so-predictably poured taxpayer funds worth over €400 million into the company.

By the terms of the new agreement, signed in late 2016, current shareholders would keep just 5% of the new Abengoa. The firm’s founding family, the Benjumeas, who were roundly blamed for the company’s woeful mismanagement, would only own 2.5% of the new company, while banks and bondholders would receive 40%, in return for a massive haircut on old Abengoa’s debts. The rest went to new investors, which mainly consist of global hedge funds and private equity groups.

Thanks to this debt renegotiation, Abengoa avoided becoming Spain’s biggest ever corporate failure. But it can still fail again.

The born-again shrunken energy giant recently proposed issuing new super-senior debt worth €142 million to compensate the holdout bondholders, which include global investors like Exim, Zurich, Liberty, Portland General Electric, the Islamic Corporation for Insurance of Investment and Export Credit, and Haitong Investment. But the firm’s current creditors have rejected the proposal, blanching at the potential size of the total litigation bill that Abengoa could end up facing: €450 million.

That’s a lot of dough for a firm whose current market cap is just €208 million. Since April 2017, Abengoa’s “A” shares have plunged over 90%, from €0.87 to €0.02. Its “B” shares hit €0.01 last April and stayed there ever since — because the minimum share price of listed companies in Spain is €0.01.

Because the stock of Abengoa (and another listed company called Urbas) has hit rock bottom of €0.01, meaning their shares can no longer trade downward, Spain’s stock market operator, the BME, decided to reduce the minimum share price of listed companies from €0.01 to €0.001 (a tenth of a penny). The move, which is scheduled to take effect in October, would mean that the pathetic value of Abengoa’s B shares could plunge even further, potentially diluting the value of the holdings of Abengoa’s former shareholders from almost nothing to virtually nothing.

The firm’s founding family, the Benjumeas, which will be among the hardest hit by the change, have come up with a plan to stop that from happening. The plan would involve pushing through a stock split before BME’s new regulation comes into effect. In the case of Abengoa, one share worth 1 penny would be converted into 10 shares worth 0.1 penny a piece. That way, existing shares would instantly hit the new rock bottom price of €0.001, but there would be 10 times as many shares, and the value of the shareholder’s holdings would not have changed.

This plan, mooted by Abengoa and Urbas, has infuriated Spain’s market regulator, the CNMV, which has threatened to delist both companies from the stock exchange if they proceed to split their stock. Unperturbed, Urbas carried through on its stock split last week. Abengoa may do the same in a couple of weeks’ time.

If CNMV follows through on its threat and expels Abengoa and Urbas from the stock exchange it could have negative ramifications for some Very Important Shareholders, including the Spanish government and very large banks. Or will it blink? Some of those Very Important Shareholders are already exhorting the CNMV to ban short sales of Abengoa stock, just in case things get uglier. For the BME’s part, it has announced that it will lower the minimum price threshold further, to €0.0001 (i.e. a 100th of a penny), in order to neutralize Urbas’ recent stock split.

As for Abengoa, its problems continue to multiply. It has been charged (together with Belgian peer Alcogroup and Swedish company Lantmannen) by EU antitrust regulators with rigging ethanol benchmarks a few years back. Abengoa and Alcogroup are reportedly seeking to settle the case. Under such a procedure, companies admit wrongdoing in return for a 10% cut in a fine.

Nonetheless, the financial fallout could be significant. EU sanctions can be as much as 10% of a company’s global revenues. For a company like Abengoa that is still struggling to groggily get back on its feet financially, a fine of that magnitude may be difficult to survive. By Don Quijones
 

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  29 comments for “It Didn’t Take Long: Abengoa Is Back At It

  1. ISMAR
    Sep 22, 2018 at 10:23 am

    Go in negative. We are in matrix now.Lies.-0,01€

    • William Smith
      Sep 22, 2018 at 6:22 pm

      I can’t see any difference between negative stock prices and negative interest rates. So your -0,01€ suggestion is well within the fiscal philosophy of the EU.

  2. RepubAnon
    Sep 22, 2018 at 11:14 am

    Sounds like it’s about time for Dandy Don Meredith to start singing “Turn Out The Lights, The Party’s Over.”

    • Crysangle
      Sep 22, 2018 at 12:50 pm

      They still got some eths.

  3. Maximus Minimus
    Sep 22, 2018 at 11:46 am

    I am not sure if it occurred to the Spanish market regulator, but maybe they can price the shares in bitcoins. They can be divided to any number of decimal places unlike euros. /sarc

    • MC01
      Sep 22, 2018 at 1:31 pm

      Bitcoin can only be divided up to a satoshi, which is one hundred millionth (0.00000001) of a Bitcoin. Apparently it’s the finest denomination the blockchain can record.
      At today exchange rate 0.01€ is worth 18 satoshi, so unless Bitcoin keeps on falling like a stone it may not be enough to keep on tracking Abengoa and Urbas slide into taxbayer-backed oblivion.

  4. raxadian
    Sep 22, 2018 at 12:32 pm

    Basically, the only way to save the company is share buy back, but who would be giving them the money?

  5. Crysangle
    Sep 22, 2018 at 12:37 pm

    B shares are listed at two tenthousandths of a cent at

    http://www.abengoa.com/web/en/accionistas_y_gobierno_corporativo/estructura_capital/

    for whatever reason. The board of directors have been very prudent and own none, the perk of avoiding possible accusations of insider trading.

  6. Dave Kunkel
    Sep 22, 2018 at 3:12 pm

    “Enron-esque aplomb”

    I really enjoy Don Quijones’ writing!

  7. Tom Stone
    Sep 22, 2018 at 4:20 pm

    Since Abengoa needs to restore confidence, I recommend they add Elon Musk to their board.

    • Sep 22, 2018 at 6:00 pm

      “Success secured.”

    • Maximus Minimus
      Sep 22, 2018 at 7:46 pm

      Free wind to generate renewable electricity; a match made in heaven.

      • Bill from Australia
        Sep 23, 2018 at 4:38 am

        I create free wind if that helps

    • Canpichurri
      Sep 23, 2018 at 1:17 pm

      The imaginary funding they will find in … Arabian countries? This company is a joke, however for the thousands of workers and families this is a nightmare.
      Another example of a management covered by an unexperienced government which will go bust. Nothing more to add.

  8. Halsey Taylor
    Sep 22, 2018 at 7:50 pm

    Wow. It takes a lot to make SunEdison look good. Well… maybe just not so bad.

  9. TemeTiTo
    Sep 22, 2018 at 8:08 pm

    buy, buy, are cheap …
    UP! Abengoa …

  10. nick kelly
    Sep 22, 2018 at 10:43 pm

    As DQ reported some time ago, may I remind all that first year econ student Pepe Balsa did a paper on Abengoa before it hit the fan and concluded it would go bankrupt.

    ‘I don’t understand how it could turn liabilities into assets’ he said.

    Unfortunately this budding genius of finance, a shoo- in to be hired by Goldy, transferred to, of all things: medicine.

    You can’t make this stuff up.

    • Kaz Augustin
      Sep 23, 2018 at 3:39 am

      If they didn’t like him in Economics, they’re going to *love* him in Medicine! /sarc

  11. L Lavery
    Sep 23, 2018 at 2:22 am

    They may as well go the whole hog and use infinitesimals[1]. At least it’d put a stop to further division. It’s a rather abstract idea of a number, but that’s rather fitting given the way economies are going nowadays. Will we eventually see the introduction of imaginary interest rates?

    [1] https://en.wikipedia.org/wiki/Infinitesimal

  12. Álvaro
    Sep 23, 2018 at 2:46 am

    There have been rumours for years that Abengoa controls the Andalusian government and even blackmails them. It have been published in the press that the company forced Susana Díaz to pact their bailout with Mariano Rajoy, in exange for letting them get to power.

    https://www.elconfidencialdigital.com/articulo/dinero/Moncloa-Susana-Diaz-Gobierno-Abengoa/20161018191006083193.html

    https://www.elconfidencialdigital.com/articulo/dinero/Susana-Diaz-PSOE-Gobierno-Abengoa/20160811191257082456.html

  13. polistra
    Sep 23, 2018 at 5:52 am

    Why would an exchange lower the minimum? The original purpose of an exchange was to raise capital for production. When the shares are worthless, the company no longer has capital, so it has no reason to buy and sell shares.

    This move acknowledges that trading has become pure betting, pure fantasy football, totally disconnected from real business.

    • George McDuffee
      Sep 23, 2018 at 2:26 pm

      +10

  14. Charo
    Sep 23, 2018 at 5:58 am

    Everything is too negative for this company, it seems very strange to me, the times that companies went bankrupt was quicker and I aggregate if giving possibility to investors .. I smell an imminent rise in the price only because of the simple fact that everybody he is sure to come down.

  15. Alex
    Sep 23, 2018 at 9:57 am

    JHC the fleecing never stops. The corruption really is f’ing deep deep deep.

    • Emily
      Sep 23, 2018 at 10:23 am

      Lie, Urquijo is not corrupt has a great international curriculum, has saved a company as abengoa and now it only remains to up.

  16. Piter l
    Sep 23, 2018 at 10:07 am

    Abengoa b Is the New apple or the New Bitcoin… Is the best opción to one year… X1000 to x 5000

  17. Emily
    Sep 23, 2018 at 10:17 am

    Possibly in the next month the shares of abengoa B are above 0.05, cancellation of new money, imminent payment challenges and collection last sale AY.

  18. Thunderstruck
    Sep 25, 2018 at 10:43 pm

    “Some of those Very Important Shareholders are already exhorting the CNMV to ban short sales of Abengoa stock”

    Hmmm, how *does* that work? How can you short a stock that is sitting on rock-bottom? Aside from creating a new, lower floor that is.

    But, if the value of the stock is equal to or less than one cent (in Euro), how much volume would it take to even generate enough margin from shorting it to make the effort worthwhile?

Comments are closed.