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." Continuación...