Biggest beneficiaries of the now scuttled rescue plan would have been private equity firm KKR and Banco Santander.
By Nick Corbishley for WOLF STREET:
Abengoa, the global renewables energy giant that was caught cooking its books in 2015, collapsed a year later but narrowly avoided insolvency by restructuring €9 billion of its debt and receiving a government bailout, only to hit the rocks again in 2018 and restructure even more debt and receive yet another bailout, has just hit the rocks again and filed for insolvency after the regional government of Andalusia withdrew an offer of a measly €20 million in funding as part of Abengoa’s latest rescue deal. Abengoa’s lenders finally lost patience and turned off the money taps.
Bloomberg described it as the biggest insolvency filing in Spanish history, before retracting the claim hours later. According to El País, it is the second largest, after Martinsa Fadesa’s collapse in 2008 under a €7.2 billion debt load.
As of March 31 2020, Abengoa purportedly had €5.9 billion of debt still sitting on its books — more than two thirds of it short term. That’s according to its financial statement for 2019, which it didn’t release until February 21, 2021 — just three days ago and over a year after deadline — and which still hasn’t been signed off by its auditor, PwC.
Of course, it’s perfectly possible that Abengoa’s debt load is larger than it claims. The company has form when it comes to hiding monstrous amounts of debt from investors and regulators for inordinate lengths of time.
What’s more, its 2019 financial statement did not include the all-essential auditor’s report, for the apparent reason that the board didn’t even bother sending the document to its auditor, PwC, before publishing it. This is not just highly improper, it contravenes Spain’s market regulations. It also makes the document virtually worthless. And that was enough to finally spur market regulator CNMV into action, which has launched an investigation into Abengoa’s board of directors.
Abengoa has been back on the ropes for some time but in August it reached a preliminary deal with its creditors to restructure its debt and obtain additional liquidity. History being repeated, it seemed. But the deal was scuppered when a large bloc of disgruntled retail shareholders decided that they’d finally had enough of being taken for a ride by the company’s management.
Abengoa almost totally wiped out its shareholders in its 2016 restructuring. Since then, the stock fell further toward zero before finally being suspended months ago. On the last day of trading, the “B” shares were worth just half a cent.
In November, the minority shareholders voted out Abengoa’s then-president Gonzalo Urquijo Fernández de Araoz, whose sole function had been to represent the interests of Abengoa’s biggest creditors, its lenders. The person they elected in his place, Juan López-Bravo, ended up reneging on his pledges and threw his support behind Abengoa’s original rescue plan.
That plan would have seen most of its assets transferred to a holding company, which would in turn receive €230 million in state-backed bailout loans. Creditors, in particular the group’s suppliers, would have taken a big haircut while shareholders no longer matter.
The biggest beneficiaries of the plan would have been Abengoa’s two largest creditors, Banco Santander, and the U.S. private equity fund KKR, which have the greatest exposure to Abengoa’s debt. If the deal had gone ahead, they would have ended up holding around 60% of the stock of a newly restructured company.
But the deal is now off. The banks have cut off financing. The shareholders had planned to vote out Gonzalo Urquijo Fernández de Araoz at the next shareholder meeting and replace him with Clemente Fernández, a veteran boardroom executive with extensive experience of salvaging companies in distress. But the banks have preempted it by cutting off the money taps and triggering insolvency.
The board of directors is now seeking alternatives to ensure the subsidiaries that carry out the group’s activities remain viable, the company said in the filing. This has been the plan all along: to liquidate the parent company, Abengoa SA, while keeping many of the subsidiaries that hold the most valuable operational assets alive.
The battle for control of the company continues to rage. The blame game, between the banks and different branches of the government, has begun. And the market regulator has finally been forced to pay attention to what’s been happening behind Abengoa’s boardroom doors.
Plus, by forcing the company into insolvency, the banks have effectively admitted that Abengoa is insolvent, which will make it a lot harder for the government to justify giving the company yet another bailout. But this is Abengoa we’re talking about, one of the world’s most resilient zombie companies that has always managed to get another bailout and keep on going. By Nick Corbishley, for WOLF STREET.
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