LONDON, Sept 25 (IFR) - Abengoa intends to refinance a 200m project finance loan from a US hedge fund, but may have trouble doing so given the market’s continued wariness of the Spanish energy firm’s debt.
Multiple sources told IFR the loan came from Elliott Management, the US fund involved in a long-running battle with Argentina over its sovereign debt default.
Abengoa decided to call the loan ahead of its July agreement to sell the underlying assets, as part of a disposal programme to bolster its balance sheet. Sources indicate that the loan is yet to be repaid. Abengoa declined to comment.
The episode sheds light on Abengoa’s funding needs in the lead up to its 650m equity capital raise, in which its main shareholder will concede control.
It highlights the difficulties the company could still face in refinancing billions of euros of project finance bridge loans. Abengoa classes many of these loans as “non recourse debt in process”, excluding them from its corporate debt figures even though they usually benefit from a corporate guarantee.
Abengoa’s decision to reclassify a corporate bond as non-recourse last year spooked the bond market, triggering more scrutiny of its accounting practices and debt levels.
The company had 2.2bn of non-recourse debt in process as of June 2015.
The 200m loan, which the company described to investors as an “equity unlock”, was raised against its Solaben 1 and 6 Spanish solar projects in October 2013.
Project Finance International, a Thomson Reuters publication, reported in July that Abengoa appointed banks to raise an up to 285m project bond to refinance the bridge loan, but the deal has not got off the ground due to the uncertainty over the company’s finances.
Several investors said the project bond would be a difficult sell given the company’s corporate bonds are trading at deeply distressed levels, despite the project’s investment grade status.
Abengoa intends to sell Solaben 1 and 6 to US-listed yieldco Abengoa Yield, announcing in July that it expects total cash proceeds of around 277m.
If the refinancing continues to stall, it could limit the benefits from the planned sale of the two solar projects, as Abengoa has said new debt will unlock up to 90m of extra cash.
The Spanish energy company owns a 49% stake in Abengoa Yield, to which it sells operational projects in order to raise money and deconsolidate their debt.
Abengoa told investors on Thursday it aims to raise at least 1.2bn from asset disposals by the end of 2016
Aside from selling projects, Abengoa has said it could raise the money by further selling down its stake in Abengoa Yield, but investors have questioned whether that could lead to change of control waivers being triggered.
One said these would be triggered if Abengoa’s ownership drops below 35%, meaning the yieldco could be forced to buy back its project debt. Abengoa declined to comment on this.
Abengoa Yield’s operating subsidiaries had US$4.9bn of net project finance debt as of June 2015. (Reporting by Robert Smith,; editing by Alex Chambers)