“Where’s the Money Gone?” Rescue of Spain’s Biggest-Ever Corporate Bankruptcy Stumbles in Mexico

Wolf Street ^ | 15 September 2016 | Don Quijones

[Lorianne]

After nine months of fraught negotiations with its senior creditors, Spain’s 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 everyone’s convinced. The company’s 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 Moody’s played down the restructuring plan’s chances of success, citing three main causes for concern: 1.The firm’s 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 Abengoa’s largest, most valuable markets — Brazil and Mexico — would react to the company’s 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 Abengoa’s 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 Abengoa’s Brazilian assets, including the seven electricity transmission lines it operates and another nine that are under construction. In Mexico, Abengoa’s 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 Abengoa’s biggest creditors — Spanish and international banks, global hedge funds and the Spanish government. They’re 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 company’s 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 whisker’s breath of resolution after U.S. private equity fund EIG Global Energy Partners agreed to take over Abengoa’s assets, not only in Brazil but also in Mexico.

[TLI]

Brazil and Mexico were the two countries that bore the brunt of the fallout from Abengoa’s 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 Abengoa’s Brazilian assets, including the seven electricity transmission lines it operates and another nine that are under construction. In Mexico, Abengoa’s subsidiary defaulted on tens of millions of dollars worth of debt, resulting in a flurry of investor lawsuits.

Aah... yet another green energy "miracle."

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