By katie linsell and luca casiraghi
Investors reduced bets against Abengoa SA amid speculation the Spanish renewable-energy company may be able to secure new funds.
The probability of default signaled by five-year credit-default swaps dropped to 88 percent from 94 percent yesterday, according to data provider CMA DE Shaw & Co and BlackRock Inc pared short positions in the company’s stock.
Abengoa is seeking to raise capital and dispose of assets to cut some of its 9.8bn euros ($10.9bn) of gross debt and bolster its cash position. It’s discussing options including a larger share sale than previously planned and finding an anchor investor from Europe or the Middle East to underpin the offering, according to people familiar with the matter, who asked not to be identified because the deliberations are private. No decision has been made, they said.
“Investors with shorts are probably taking some profit,” said Steven Logan, the London-based head of European high yield at Aberdeen Asset Management, which manages $483bn. “There’s still a huge amount of execution risk. Abengoa needs a transformational capital raising to give the company credibility.”
Abengoa’s press office said “the process with the banks continues advancing well,” while declining to elaborate. It previously said its credit-default swaps don’t represent the company’s creditworthiness or the value of its assets.
“Abengoa owns a number of very valuable businesses and assets,” the company e-mailed in response to questions. “We continue to make progress both in the capital increase and the divestiture plan.”
Bank Advisers
Banks are advising Abengoa to raise about 800m euros, instead of the 650m euros previously announced, according to the people. The company said it will complete 500m euros of asset sales by the first quarter of 2016, in addition to the capital increase, according to a regulatory filing on August 3.
Investors have been looking more closely at Abengoa’s complicated financial structure since November and betting that its plan wouldn’t be successful or sufficient.
Credit-default swaps on Abengoa were the most traded in the world last week and signaled a record 97 percent probability of default within five years last Wednesday, up from 65 percent in January. They’re still the second-highest of any company or country after Venezuela, according to data provider CMA.
A total of 545 contracts covering a gross $495m of Abengoa’s debt changed hands last week, Depository Trust & Clearing Corp. data shows.
Cutting Shorts
“An increasing number of market participants view a default of the company as a likely scenario and don’t believe in Abengoa’s ability to successfully execute the capital increase,” Felix Fischer, a credit analyst at independent research provider Lucror Analytics in Singapore, said earlier this week. Lucror has a hold recommendation on Abengoa’s bonds and credit swaps and sees its default risk as “high.”
Total short positions on the company’s shares jumped to 8.5 percent of equity on August 7 from 6.68 percent on July 24, according to Spanish securities regulator CNMV DE Shaw cut its short to 1.37 percent of Abengoa’s equity from 1.48 percent on Thursday.
BlackRock, which hired Abengoa’s former Chief Executive Officer Manuel Sanchez Ortega last month, reduced its position to 0.85 percent from 1.28 percent on Wednesday across its BlackRock Investment Management UK Ltd. and BlackRock Institutional Trust Company units.
Abengoa said in May that Sanchez Ortega left for “strictly personal reasons” and would remain a board member, while naming him to the international advisory council. He gave up the board position after joining BlackRock and kept a position on the advisory council, Abengoa said on July 27.
Sanchez Ortega’s role as head of strategic development and head of BlackRock’s Latin American infrastructure group is unrelated to funds trading Abengoa’s securities, said Stephen White, a spokesman for the world’s biggest money manager in London.
Abengoa’s 500m euros of 6 percent notes maturing March 2021 rose to 56.5 cents yesterday from a record low of 45 cents. The 265m euros of 5.5 percent notes due October 2019 issued by Abengoa Greenfield SA climbed to 54 cents last Wednesday.
Opaque Structure
“The CDS and bond prices suggest that the market believes that a default is a real possibility,” David Newman, head of high yield at Rogge Global Partners in London, said earlier this week. Rogge manages more than $50bn and doesn’t hold Abengoa’s bonds or stock.
Investors are concerned that the company’s debt structure is opaque and difficult to understand, he said. Seville-based Abengoa has hundreds of projects and subsidiaries, and raises funding to build power lines, water plants, solar and biomass plants worldwide.
The company classifies short-term bridge financing for projects as “non-recourse debt in process,” even though it’s guaranteed by the parent. When projects are completed, Abengoa refinances the loans with long-term debt that doesn’t have a claim on the company.
Until November, all of Abengoa’s bonds were categorised as corporate debt. Then, it reclassified some bonds as non-recourse-in-process bridge financing. The move surprised creditors, even though it was allowed in the documentation of those specific securities and still had corporate guarantees.
Bloomberg
By katie linsell and luca casiraghi
Investors reduced bets against Abengoa SA amid speculation the Spanish renewable-energy company may be able to secure new funds.
The probability of default signaled by five-year credit-default swaps dropped to 88 percent from 94 percent yesterday, according to data provider CMA DE Shaw & Co and BlackRock Inc pared short positions in the company’s stock.
Abengoa is seeking to raise capital and dispose of assets to cut some of its 9.8bn euros ($10.9bn) of gross debt and bolster its cash position. It’s discussing options including a larger share sale than previously planned and finding an anchor investor from Europe or the Middle East to underpin the offering, according to people familiar with the matter, who asked not to be identified because the deliberations are private. No decision has been made, they said.
“Investors with shorts are probably taking some profit,” said Steven Logan, the London-based head of European high yield at Aberdeen Asset Management, which manages $483bn. “There’s still a huge amount of execution risk. Abengoa needs a transformational capital raising to give the company credibility.”
Abengoa’s press office said “the process with the banks continues advancing well,” while declining to elaborate. It previously said its credit-default swaps don’t represent the company’s creditworthiness or the value of its assets.
“Abengoa owns a number of very valuable businesses and assets,” the company e-mailed in response to questions. “We continue to make progress both in the capital increase and the divestiture plan.”
Bank Advisers
Banks are advising Abengoa to raise about 800m euros, instead of the 650m euros previously announced, according to the people. The company said it will complete 500m euros of asset sales by the first quarter of 2016, in addition to the capital increase, according to a regulatory filing on August 3.
Investors have been looking more closely at Abengoa’s complicated financial structure since November and betting that its plan wouldn’t be successful or sufficient.
Credit-default swaps on Abengoa were the most traded in the world last week and signaled a record 97 percent probability of default within five years last Wednesday, up from 65 percent in January. They’re still the second-highest of any company or country after Venezuela, according to data provider CMA.
A total of 545 contracts covering a gross $495m of Abengoa’s debt changed hands last week, Depository Trust & Clearing Corp. data shows.
Cutting Shorts
“An increasing number of market participants view a default of the company as a likely scenario and don’t believe in Abengoa’s ability to successfully execute the capital increase,” Felix Fischer, a credit analyst at independent research provider Lucror Analytics in Singapore, said earlier this week. Lucror has a hold recommendation on Abengoa’s bonds and credit swaps and sees its default risk as “high.”
Total short positions on the company’s shares jumped to 8.5 percent of equity on August 7 from 6.68 percent on July 24, according to Spanish securities regulator CNMV DE Shaw cut its short to 1.37 percent of Abengoa’s equity from 1.48 percent on Thursday.
BlackRock, which hired Abengoa’s former Chief Executive Officer Manuel Sanchez Ortega last month, reduced its position to 0.85 percent from 1.28 percent on Wednesday across its BlackRock Investment Management UK Ltd. and BlackRock Institutional Trust Company units.
Abengoa said in May that Sanchez Ortega left for “strictly personal reasons” and would remain a board member, while naming him to the international advisory council. He gave up the board position after joining BlackRock and kept a position on the advisory council, Abengoa said on July 27.
Sanchez Ortega’s role as head of strategic development and head of BlackRock’s Latin American infrastructure group is unrelated to funds trading Abengoa’s securities, said Stephen White, a spokesman for the world’s biggest money manager in London.
Abengoa’s 500m euros of 6 percent notes maturing March 2021 rose to 56.5 cents yesterday from a record low of 45 cents. The 265m euros of 5.5 percent notes due October 2019 issued by Abengoa Greenfield SA climbed to 54 cents last Wednesday.
Opaque Structure
“The CDS and bond prices suggest that the market believes that a default is a real possibility,” David Newman, head of high yield at Rogge Global Partners in London, said earlier this week. Rogge manages more than $50bn and doesn’t hold Abengoa’s bonds or stock.
Investors are concerned that the company’s debt structure is opaque and difficult to understand, he said. Seville-based Abengoa has hundreds of projects and subsidiaries, and raises funding to build power lines, water plants, solar and biomass plants worldwide.
The company classifies short-term bridge financing for projects as “non-recourse debt in process,” even though it’s guaranteed by the parent. When projects are completed, Abengoa refinances the loans with long-term debt that doesn’t have a claim on the company.
Until November, all of Abengoa’s bonds were categorised as corporate debt. Then, it reclassified some bonds as non-recourse-in-process bridge financing. The move surprised creditors, even though it was allowed in the documentation of those specific securities and still had corporate guarantees.
Bloomberg
