In response to investor questions in recent weeks, we provide our updated
thoughts on Abengoa. We continue to recommend investors prepare for our
scenario where bond holders should expect recoveries of 21.1%.
Almost exhausted all of its options… A press article published in El
Confidencial this morning reported one of Abengoa’s biggest creditors has
decided not to underwrite the company’s planned capital raise unless a
series of terms and conditions was satisfied. Previous reports had suggested
the creditor was willing to contribute around €120m. This additional setback
for Abengoa follows press reports from last week (source: Expansion)
which mentioned a handful of its other significant lenders had also declined
to participate. The group’s senior unsecured bonds declined by around 15pts
on average, justifiable in our view, with the most extreme price action in the
front-end, as the group's €8.500% notes due 2016 fell around 20pts. In our
view, funding options are now limited at Abengoa and the potential to
execute a planned capital raise of €650mn is now looking rather stretched.
… as its planned capital increase has not attracted sufficient interest.
Since management first announced its planned capital increase of €650mn
on 3 Aug, we have not been convinced with its ability to execute such a
sizable equity offering. Even when applying optimistic assumptions to our
financial forecasts, we struggle to arrive at a scenario where Abengoa’s
investment case supports the planned scenario. Additionally, we are not
convinced the ultimate shareholders are in a position to sufficiently shore-up
the group's balance sheet.
We assume some cash inflows during 2H2015… Despite the wider market
turmoil, we assign full credit to the cash inflow which relates to previously
executed asset drop-downs and share sales (unlike its receivables position,
for example). Over 2H2015, we believe Abengoa is scheduled to receive
monies relating to the following projects: i) ROFO 3 at €105mn (African &
Spanish solar assets, combined capacity of 450MW); and ii) ROFO 4 at
€275mn (Spanish solar assets, combined capacity of 100MW). We also
expect the cash relating to its YieldCo stake sales will be received during
2H2015 and amount to just over €100mn, bringing total inflows to €480mn.
Note, we are excluding the first tranche of the APW-1 payment of around
€90mn as we believe there is risk of this being delayed.
