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LONDON, Aug 25 (IFR) - Credit Agricole, HSBC and Santander have agreed to a standby underwrite for Spanish energy group Abengoa's proposed 650m capital increase, according to sources with knowledge of the matter.
Contracts have not yet been signed, however, and there remain questions as to whether that sum will be enough to plug Abengoa's capital requirements.
Bank of America Merrill Lynch and Citigroup are also talking to the company regarding underwriting but have yet to come to a final decision on whether to support the deal.
Two senior bankers involved with the discussions said that the success of a rights issue would depend on moves to improve Abengoa's capital position through asset sales, potentially including a reduction in the group's stake in Abengoa Yield, the US-listed entity that contains the group's operating assets.
Abengoa has already committed to completing 500m of assets sales by the first quarter of 2016.
Sources said that shareholder BlackRock will sub-underwrite 50m of the rights issue, with fellow shareholder and private equity energy specialist First Reserve also set to participate in the fundraising.
As before, main shareholder Inversion Corporativa is expected to be involved but it is not certain whether it will subscribe for its full entitlement, relating to its 57.53% stake (including 6.18% through Finarpisa). The foundation also owns 26% of Abengoa's B shares, according to Thomson Reuters data.
The banks named declined to comment, while BlackRock and First Reserve could not be reached for comment. Abengoa did not respond to requests for comment.
Abengoa's B shares surged nearly 32% today, apparently in reaction to news from Spanish paper Expansion that the rights issue will comprise 90% B shares and 10% A shares.
The A shares also rose today, albeit less sharply, and were up more than 11% in early afternoon before finishing the day up 8.656% at 1.657. The B shares closed up 26.615% at 0.98.
Several bankers involved with the discussions said that the deal size might need to be increased, with one suggesting a fundraising haul from the rights issue of closer to 1bn.
Abengoa has denied recent press reports that it has been advised to raise either the size of the rights issue or the scale of planned asset sales.
Abengoa's bonds rallied on Tuesday, although they are still at deeply distressed levels. The company's 375m 7% 2020 note is bid at a 52 cash price to yield 27%, according to Tradeweb. (Reporting by Robert Venes; Editing by Matthew Davies)