4 de junio de 2015 / 13:03 / en 2 años

OHL intercompany loan comes under scrutiny

* Market nervous around 1bn intercompany loan

* Investors argue loan used to avoid covenant trouble

* Triggers on margin loans spark concerns

By Robert Smith

LONDON, June 4 (IFR) - A large intercompany loan made to Obrascon Huarte Lain by a subsidiary is beginning to worry analysts and investors, particularly because some believe it was raised to avoid a breaching a covenant.

Subsidiary OHL Concesiones disclosed in its 2014 annual results statement that it made a EUR1.08bn loan to its parent company OHL SA, with a fixed-rate interest of 6.8% maturing on December 31 2015.

But as the annual results are only presented in Spanish, many investors were not aware of the loan's existence until recently. Despite the intercompany loan's size it was not specifically mentioned in the offering memorandum for OHL's last bond deal in March.

"Things like this should be disclosed. It's not like it's a small EUR20m intercompany loan," said a high-yield bond investor.

"On a consolidated basis it may net out, but if it (OHL Concesiones) goes bust that won't matter. There's definitely more people talking about this loan than there were a few weeks ago."

The Spanish construction firm's financials have come under closer scrutiny after the company had to post more collateral against a margin loan on OHL Mexico stock on Friday, as allegations of corruption at its Mexican unit triggered a slide in its share price.

OHL Concesiones owns just over 56% of OHL Mexico's stock, although the bulk of this is pledged against the margin loan and an exchangeable bond.

Fitch recently put OHL's BB- credit rating on watch negative citing this loan as a concern. The ratings agency argued that while OHL SA's 100% ownership of OHL Concesiones means the loan could be cancelled, it would pose a problem if OHL Concesiones defaulted in the interim, leading to liquidation proceedings.

"This intercompany loan would be a source of value for the repayment of the creditors of OHL Concesiones if the group and its creditors became segregated, with no sufficient funds to reimburse existing obligations," the ratings agency said.

COVENANT PRESSURE

OHL's bonds have a clause restricting it from raising additional debt if its interest coverage ratio is less than 2.5x. Its loans are believed to have similar clauses although the terms are private.

OHL only just met this 2.5x level at the end of 2014. But this was only achieved because the company included a EUR123m dividend from OHL Concesiones in its recourse Ebitda number for the first time, which it now says will be recurring.

Fitch said the EUR1.08bn loan represents an "advance payment on future regular or special dividends/share buybacks or asset contributions".

Some investors believe that this advance helped it avoid breaching the interest coverage covenant.

"If they hadn't included the dividend they would've breached the covenant," said a hedge fund investor. "I understand companies use intercompany debt transactions quite frequently but to structure it in this way is a little disingenuous."

OHL did not respond to requests for comment.

The structure of this dividend allows OHL to book cashflows from this subsidiary and yet not count OHL Concesiones' liabilities - such as the Mexican margin loan - in its corporate leverage numbers.

COLLATERAL TRIGGERS

It's not just the Mexican margin loan causing investor jitters, however.

In 2012 OHL entered into a EUR1.1bn margin loan secured by its 13.9% holding in Spanish infrastructure company Abertis, which requires cash collateral if its share price drops below EUR15.105.

OHL refinanced a small part of this in April with a new EUR273m loan without triggers. But the rest of the loan is skirting very close to requiring further collateral, with Abertis' share price at EUR15.695 at 1358 BST.

The share price could come under further pressure, given that private equity firm CVC sold off a 7.5% stake in Abertis at the start of March.

"They (CVC) still have an 8.1% stake and if they sell it I wouldn't be surprised to see the share price drop below the EUR15.105 trigger," said the high-yield bond investor.

Furthermore, Grupo Villar Mir, a holding company run by OHL's Chairman Juan Miguel Villar Mir, which owns a 58% stake in OHL, has a EUR312m margin loan against OHL shares according to GVM's first quarter results presentation.

The margin call price on the loan is listed at EUR16.50. OHL's shares are only just above this trigger, EUR16.605 at 1356 BST.

GVM has taken steps to alleviate this pressure, however, with the results presentation stating that since the end of March it has been able to "significantly push down the margin call levels". (Reporting by Robert Smith)

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