Gonvarri to Be Top Abengoa Holder on $377 Million Injection

by Rodrigo Orihuela; Katie Linsell

November 9, 2015 — 3:11 AM HKT; Updated on November 10, 2015 — 1:33 AM HKT

• Firm to buy shares to take 28 percent stake in Abengoa

• Gonvarri investment marks latest bid to shore up Abengoa

Gonvarri Steel Services, a Spanish industrial company, will become the biggest shareholder in Abengoa SA after agreeing to invest 350 million euros ($377 million) to acquire 28 percent of the embattled renewable energy producer. The shares surged.

Gonvarri will build its stake through capital increases in two stages, Seville, Spain-based Abengoa said in a regulatory filing Sunday. Abengoa Class B shares surged 11 percent to close at 1.09 euros in Madrid. Abengoa’s 550 million-euro 8.875 percent bonds maturing in 2018 jumped 8 cents on the euro to 56 cents, the highest in more than three weeks, according to data compiled by Bloomberg.

The total amount of Gonvarri’s investment will be 350 million euros, according to a person familiar with the transaction who asked not to be named because not all the information was made public in the filing. Gonvarri will first invest 250 million euros via a capital increase excluding preferential rights for existing holders and will then subscribe its proportional stake in a second 400 million-euro share sale.

“The proposed transaction with Gonvarri is positive and substantially reduces the execution risk of the capital increase,” Felix Fischer, a credit analyst at independent research provider Lucror Analytics in Singapore, wrote in a note to clients. “However, once the capital-raising is completed, Abengoa will have
to substantially scale back its investments to avoid another liquidity crunch.”

The deal is Abengoa’s latest attempt to bolster its financial position, following an agreement announced Oct. 30 to receive a loan from Talos Capital Limited as a way to reduce credit costs. Abengoa has been working since early August on a 650 million capital increase, announced after it surprised markets by cutting its free cash flow guidance and tweaking conditions on certain bonds.

The deal, which is supported by Abengoa’s current controller, Inversion Corporativa SA, is subject to conditions including the signing of a “substantial package” of financial support for the company by its creditors, Abengoa said in the filing without specifying the amount. Abengoa’s lenders will be asked to provide 1.5 billion euros in liquidity, El Confidencial reported today, citing unidentified sources in the banking industry.

Gonvarri will acquire Abengoa Abengoa Class A shares at 0.999 euros each and Class B shares at 0.767 euros in the first capital increase, according to the filing.

As part of the talks to clinch shareholder support for the capital increase, Inversion Corporativa, also known as IC, agreed to reduce its stake in Abengoa to 40 percent from 57 percent. IC is controlled by the family of Abengoa founder Javier Benjumea, whose son Felipe stepped down as chairman in September.

Gonvarri is the owned by Spain’s Corporacion Gestamp, an industrial group.

(A previous version of this story was corrected to clarify Gonvarri’s relationship with Gestamp.)