LONDON, Sept 4 (IFR) - Abengoa has appointed Lazard to help advise on options in its hunt for fresh investors, according to sources with knowledge of the matter.
The Spanish renewable energy producer is attempting to raise 650m via a rights issue, which seems ambitious considering its market capitalisation is just 876m.
IFR reported on August 25 that Credit Agricole, HSBC and Santander had agreed to standby underwrite the issue, with Bank of America Merrill Lynch and Citigroup also considering whether to be involved.
However, a local media report on Thursday said the latter two banks as well as Societe Generale had decided against participating.
Instead, it appears that Lazard, which also has debt restructuring expertise, has been brought in to provide advice.
BAML and Citigroup are still in contact with Abengoa, but sources say they are reluctant to commit until the company provides further reassurance on additional funding plans. The company has also undertaken to sell assets, which could include part of US-listed Abengoa Yield, to raise 500m of additional funds.
Restructuring advisers have been approaching Abengoa’s board offering to assist the company in its plans, according to one Madrid-based banker. The company has 5.7bn of debt in total.
Bonds from the troubled Spanish company went into freefall on Friday after Bloomberg reported that Lazard had been retained.
At the moment, Lazard’s mandate is to help raise finance but market participants are clearly considering the possibility that the advisory firm had been hired for its debt restructuring expertise. Lazard declined to comment.
“Abengoa have called up every bank about underwriting - you don’t need Lazard to advise on a rights issue. You can infer from their involvement that this is a statement on the state of the underwriting process and the unwillingness of banks to be involved,” said one ECM banker.
A restructuring specialist supported that view, saying: “These guys have had relationships with investment bankers for over 20 years. You can only believe that they hired Lazard for a debt restructuring.”
The company’s 375m 7% 2020 senior note issue plummeted from a cash price of 50 to just 38 on the back of the news, according to Tradeweb prices.
That note was only issued in April - at 97.954. Its price collapse reflects fears that the company will still need to restructure its debts next year, even if any capital raising is completed.
The sell-off in Abengoa’s bonds is even more marked in its short-dated debt. The company’s 500m 8.5% March 2016 issue was quoted at a cash price of just 55 on Friday afternoon in a run from a distressed trader. The bonds were bid as high as 89 earlier in the week, according to Tradeweb.
Abengoa has a complex capital structure. Its main shareholder, Inversion Corporativa, whose principal investor is the company’s founding Benjumea family, effectively controls the group via a series of A shares with greater voting rights than the more widely held B shares, in which it has only a 26% stake.
Restructuring advisers are also understood to have approached bondholders and bank creditors but little progress has yet been made, as these creditors are waiting for distressed investors to make moves to start buying the debt before forming into committees and appointing advisers.
That is unlikely to happen until the capital increase negotiations are finished, said the restructuring specialist.
“Even if they raise 650m, so what? With such a big balance sheet I doubt it will be enough to provide confidence,” said the banker.
Abengoa’s B shares, which have halved so far this year, fell by a fifth over the week to close at 0.903. The A shares fell 7.3% during the week to close at 1.567. (Reporting by Christopher Spink and Sadrine Bradley. Additional reporting by Robert Venes and Robert Smith. Editing by Matthew Davies.)