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After months of deliberations, Abengoa has finally submitted a restructuring plan for approval, with a 24 June deadline for creditor responses. But uncertainties remain over whether SEPI, the Spanish government-backed fund, will provide €249m of funding, after months of prevarication. The disbursement by SEPI of a €81m term loan and a €168m participation loan by 30 June is a condition precedent for the transaction, alongside €300m of super senior bonding facilities from local Spanish banks. Otherwise, the Spain-based engineering and clean technology group whose parent entered into bankruptcy protection in February 2021, will file for liquidation on 1 July.
Under the restructuring plan, US-based investment fund TerraMar is injecting €200m into Abengoa, in return for 70% of the equity. Of this, €60m will repay a portion of the €588m debt at Abenewco 1, of which 25% (€68m) will be rolled into a long-term financing facility sitting alongside €140m provided by TerraMar. The remainder of the current debt will be written off.
Following the capital increase, the share splits are as follows:
(Un)Feasibility study
Creditorstook control of Abengoa in March 2017, after a protracted restructuring following a pre-insolvency filing in 2015, with over €9bn of debt sitting across a complex group and capital structure. At the time one advisor likened it to Europe’s Enron, with the Spanish business constructing a project-financed pyramid scheme, which collapsed when it was unable to keep up the pace of new project developments.
The 2017 restructuring involved the provision of €1.169bn of new money, with 30% of existing claims exchanged into new bonds or loans (ranking senior or junior depending on participation in the new money), and the remaining 70% of claims exchanged for 40% of the new equity. The restructuring was implemented by the new Spanish Homologocian procedure.
The second restructuring has been under construction for almost two years.
The latest stage of distress began in 2019, when Abengoa recorded €388m of negative equity, after an impairment on its stake in Abengoa Abenewco 2.
In the summer of 2020, creditors which included Santander, Bankia, CaixaBank, Crédit Agricole, Blue Mountain, KKR, Alden and Melqart offered a €230m refinancing in return for control. But their plan also required approvals from ICO (Official Credit Institute), CESCE (Spanish Export Credit Insurance Company) and the Andalucian government - which decided not to participate.
That November, a revised proposal was blocked by shareholders after a rebellion by a minority shareholder group led by Clemente Fernández. This led to a bankruptcy filing by the parent, Abengoa SA on 22 February 2021, with the focus shifting to rescuing the Abenewco 1 subsidiary which owns all the operating assets.
An application was originally made to SEPI for funds in March 2021. The Solvency Support fund for Strategic Companies was set-up in 2020 to support Spanish companies during Covid-19. SEPI has come under criticism for the slowness of its disbursements amid questions whether it should be used to bail out troubled companies. In theory, according a local legal advisor, the applicant cannot not have been in distress prior to March 2020, the start of the pandemic.
A number of SEPI loan applications were delayed after Ryanair successfully won a court case against a SEPI loan to Air Europa which was subsequently sold to IAG. Several loan applications, including those for steel-maker Celsa were placed on hold, until the legal position was resolved.
This March, consultants PKF Attest (legal) and Grant Thornton (accountancy, tax) said Abengoa was not eligible, as it violated several conditions, including tax and social security payments.
A revised application, limited to six subsidiaries holding its assets - Abengoa Energy, Abengoa Water, Abengoa Solar, Abener Energy, Inabensa Installations and Maintenance, and Abengoa Operation and Maintenance - was subsequently filed.
If approved, the terms of the SEPI loan are as follows:
Source: Abengoa Restructuring Presentation
According to Cinco Dias, SEPI requested further information, and revised documentation was submitted to SEPI for approval in Mid-May. This included the intentions of TerraMar towards the business and commitments to ensure continuation of employment in Spain, keeping the headquarters in the country.
Viability Plan
Under the restructuring plan, the Mexican and Peruvian operations will be discontinued, with Argentina and Uruguay placed into a ring fence. The remaining countries of operation are placed in the main perimeter.
Its intention is to reduce its overheads to revenue ratio down to 3% in the long-term, with the focus on turnkey projects for third-parties, aiming for a gross margin of above 9%.
The projected revenues and new bookings are listed below:
The intention is to refinance the €332m (estimated principal) of the long-term financing in 2028 with €223.6m of fresh debt. Leverage and cash flow for debt service should be significantly lower at this point. Free cash flows are projected to increase from €119.5m in FY 22 to €724m in 2030, according to the chart below:
Restructuring Outline
The headline terms of the restructuring are similar to those agreed in the summer of 2020.
In total, €208m of new 6.5-year debt paying 3% cash and 7% PIK is provided (€140m TerraMar, €68m rolled by existing creditors). This will rank junior to the SEPI finance and the €300m super senior bonding facilities. Accrued and unpaid interest owing from July 2020 are to be written off.
Source: Abengoa Restructuring Presentation
From the capital increase provided by TerraMar, €32.7m will purchase 75% of the New Money 2 debt and €21.6m to purchase 75% of the A3T Convertible Put Option debt. The remaining €5m ‘will repurchase 100% of Reinstated Debt’ - according to Abengoa’s restructuring presentation.
The restructuring agreement has been prepared so that all documentation becomes effective simultaneously (SEPI, Bonding lines, TerraMar Financing) which each conditional on each other.
The debt for equity swap will be implemented in two separate steps; Firstly the Senior and Junior Old Money and Abenewco 1 convertibles will be converted into shares of the new issuer; Secondly the share capital increase will be fully subscribed by TerraMar - giving it a 70% stake and diluting the previous shareholders.
Only the OpCo debt within the perimeter of Abenewco 1 as at 31 December 2021 is to be restructured - it does not include debt at ring-fenced companies (Argentina, Uruguay) nor at companies with assets held for sale or for debt outside the perimeter.
There is also provision for €15m of ‘Abengoa Leakage’ payments (max €3m per year over five-years) from Abenewco 1 to Abengoa SA once the SEPI financing is fully amortised (2028).
