Abengoa’s Potential Bankruptcy Puts 607 Subsidiaries at Risk

by San Antonio Attorney

Abengoa, a Spain-based engineering and energy company, faces the potential risk of bankruptcy.  Should it push through without intervention, it will be marked as Spain’s “largest corporate bankruptcy.”

This bankruptcy will not only affect one company but also the other 600 subsidiaries.

The company held 607 subsidiaries in 2014.  The subsidiaries were composed of17 associates, 28 joint businesses, and 244 temporary joint ventures.

These constituents spread out over more than 50 countries, according to its annual 20-F filing to the U.S. Securities and Exchange Commission.

Abengoa has 9 billion euros (USD $9.57 billion) in gross debt.

When the company announced that it would modify the classification of its bonds, this set off bond and stock sell-offs that rapidly increased in July when the company cut off the cash flow guidance.

Abengoa also filed for a judicial request for creditor protection last Friday.

“Having a complex, corporate structure is important as a factor in the company’s situation,” said Clark Nicholls, a senior portfolio manager at AXA SA.

Nicholls cited an example that the structures worsen the company’s cash flow problems due to a multitude of units relying on financing payments from banks.

Abegoa’s scope of business covers building and operating renewable energy projects.

The company also specialized in building power transmission lines in countries ranging from China to the US.

Abengoa’s Mexico auxillary office missed two interest payments on credit notes yesterday.

The total amount of missed payments was 1.16 million Mexican pesos ($70,061)

The preliminary creditor protection permits Abengoa to suspend debt payments for four months under Spanish law.  This was done so that the company can negotiate with its creditors.

The company is also in the process of working a 650 million euro capital plan, which began last August.

Leave a Comment

Previous post:

Next post: