ACS refinancing deal provides some Iberdrola relief

MADRID (Reuters) - Spanish builder ACS (ACS.MC) won temporary breathing room for its debt-backed stake in power firm Iberdrola (IBE.MC) with a 1.6 billion euro ($2 billion) loan refinancing agreement.

ACS's leveraged purchase of shares in Iberdrola, which the building group had once wanted to control, has been at the mercy of a weak Spanish stock market, spurring the need for new loan agreements to prevent a loss-making share sale.

ACS said on Friday it signed a three-year deal with Societe Generale (SOGN.PA), replacing a previous syndicated loan to buy part of its 14.85 percent stake in Iberdrola, that will eliminate the need for fresh guarantees on the declining value of the holding.

ACS, one of the world's largest building and services groups, owes 4 billion euros on a 14.85 percent stake in Iberdrola worth 2.9 billion.

Analysts had estimated that for each 1 euro fall in Iberdrola's share price, ACS would have to provide additional cash guarantees of about 600 million euros, a difficult feat given falling revenues in its recession-hit domestic market Spain and unexpected losses from its German unit Hochtief (HOTG.DE).

"The new agreement includes the subscription of certain derivative instruments and a stock loan agreement on Iberdrola shares, which eliminates the need to provide additional guarantees in the case of an Iberdrola share price reduction from the current levels," the builder said in a statement.

It did not provide further details.

IBERDROLA SALES STILL POSSIBLE

ACS, headed by self-made billionaire Florentino Perez who also runs soccer club Real Madrid, said it will take a decision on the future of its investment in Iberdrola in three years' time.

Its sale of a 3.7 percent stake in Iberdrola in April triggered speculation that the builder was reversing its initial strategy to gain control of the utility.

Analysts have said ACS may now cut its stake to 10 percent once the utility's share price recovers. This is the maximum that it is allowed to vote at Iberdrola's shareholder meetings, given current corporate voting caps established by the utility.

The two have been engaged in a years-long legal battle during which Iberdrola has so far managed to thwart ACS's attempts to gain more control, arguing that it is a direct competitor in energy given the builder's renewable assets.

The loan refinanced on Friday, held by ACS's fully-owned unit Monte Carmelo, represents 8.25 percent of Iberdrola.

"At this stage, we can not rule out a similar agreement being reached in the short or mid term for the remaining 6.5 percent stake," UBS analysts said in a note to clients.

The utility will also push forward with other planned asset sales, including renewable energy and toll road assets and desalination plants.

ACS shares closed 1.3 percent down at 14.01 euros on Friday, while Iberdrola ended 1.4 percent higher at 3.19 euros, compared to a 0.5 percent gain on Spain's blue chip index .IBEX. ($1 = 0.8208 euros)

(Editing by David Holmes and Jane Merriman)