Posted on 09/17/2016 9:36:54 AM PDT by Lorianne
After nine months of fraught negotiations with its senior creditors, Spains teetering green-energy giant Abengoa is tantalizingly close to a financial fresh start. In August, the firm announced that it expects to win the approval of at least 75% of its creditors for a restructuring plan by September 30. The banks and hedge funds that own most of its debt are already on board.
But not everyones convinced. The companys B-shares have barely budged from the 0.20 level since the announcement. As WOLF STREET reported a couple of weeks ago, the US rating agency Moodys played down the restructuring plans chances of success, citing three main causes for concern: 1.The firms precarious liquidity situation; 2.Its unseemly high leverage ratio (even after the restructuring is completed) 3.The towering list of conditions and obligations to which it will be bound once the agreement is finalized.
The biggest issue was how two of Abengoas largest, most valuable markets Brazil and Mexico would react to the companys announcement that it was seeking preliminary protection from creditors.
A Major Headache
Brazil and Mexico were the two countries that bore the brunt of the fallout from Abengoas financial collapse. In Brazil, 2,300 Abengoa workers 42.5% of the workforce were laid off in the first few weeks. The response of the Brazilian government was to threaten to embargo Abengoas Brazilian assets, including the seven electricity transmission lines it operates and another nine that are under construction. In Mexico, Abengoas subsidiary defaulted on tens of millions of dollars worth of debt, resulting in a flurry of investor lawsuits.
Both developments were a major headache for Abengoas biggest creditors Spanish and international banks, global hedge funds and the Spanish government. Theyre determined to see the firm rise from the ashes, thereby saving themselves the inconvenience of having to completely write off part of much of their investments in the firm. Even if a final agreement were reached to restructure the company, Abengoa could end up losing hundreds of millions of euros worth of assets in Brazil as well as having to shell out millions of euros in compensation in Mexico, both of which would decimate the companys already shrinking value.
But the headache is apparently beginning to subside at least in Brazil. According to the Spanish daily El Confidencial, the dispute there is within a whiskers breath of resolution after U.S. private equity fund EIG Global Energy Partners agreed to take over Abengoas assets, not only in Brazil but also in Mexico.
Aah... yet another green energy "miracle."
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