In the forlorn hope the world’s biggest green-energy zombie will somehow survive the oncoming storm.
When it comes to amassing and defaulting on insurmountable debt loads and then having the debt restructured to live another day, few companies can hold a candle to Abengoa, the global green energy giant, headquartered in Spain, famed for cooking its books with Enron-esque aplomb before collapsing in 2015. Reverberations were felt the world over, including in the U.S. where its unit filed for bankruptcy with $10 billion in debt. The company then rose from the ashes of its monstrous debt pile, only to reenter default in 2019. Once again, the debt was restructured.
Now, Abengoa is warning of a third default, which it’s partly blaming on Covid-19, although its latest rash of problems seem to have predated the virus crisis. The firm is two-and-a-half months late in releasing its financial report for 2019, which was due in late February.
The ostensible reason for this delay was that the company was conducting a revaluation of its subsidiary Abenewco 2, which apparently unearthed €388 million of heretofore unaccounted-for losses, none of which could be blamed on Covid-19.
According to financial daily El Confidencial, the actual reason for the delay was that Abengoa’s auditor PwC was refusing to sign off on its 10-year business plan. Given Abengoa’s long history of financial chicanery, that’s not beyond the realms of possibility.
Even today, it’s impossible to find a copy of Abengoa’s full financial report for 2019 on its website. But it has released a three-page Updated Business Plan that has been translated into bizarrely bad English. In the document, the company reports increased sales but it has still clocked up losses of over €500 million. Granted, it’s an improvement on last year’s €1.5 billion of losses but apparently not enough to avert a new rescue plan, which includes:
- A request for €250 million in fresh loans from its five main banks (Santander, Bankia, Caixa, BBVA and Bankinter), which Abengoa hopes will be 70% guaranteed by the Spanish government’s Covid-19 emergency loan fund.
- A request for further credit lines worth €300 million from these same banks as well as the Spanish Export Credit Agency CESCE. In the first restructuring of Abengoa’s debt the Spanish government used this state-owned body to ever-so-quietly and ever-so-predictably underwrite €400 million of Abengoa’s debt, €100 million of which has already been written off. Now the company wants more of the same.
- Further haircuts for providers worth up to €700 million.
- Further debt-for-equity swaps for the company’s creditors. Abengoa’s various classes of shares trade at €0.01 or below. In other words, they do not even qualify as a penny stock.
Abengoa’s main creditors include the Spanish State and many of Spain’s biggest lenders. The biggest lender of them all, Santander, had the greatest exposure to Abengoa’s debt (€1.6 billion) and was most interested in sealing the 2016 deal, thanks to which Abengoa narrowly avoided becoming Spain’s biggest ever corporate failure, with over €25 billion of liabilities. Despite selling part of its stake in 2017 and 2018, Santander is still the largest shareholder.
Many of the other creditors must be wondering why they agreed to restructure Abengoa’s gargantuan debt pile in the first place. Perhaps at the time it appeared to make more sense to agree to a haircut, even a very large one, than to try to recover whatever they could in a liquidation.
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Nick Corbishley 