A Chapter 11 bankruptcy exit plan by Abengoa
SA's main U.S. subsidiary, Abeinsa Holding Inc,
violates the law by shielding the Spanish renewable energy
parent from lawsuits, according to the U.S. government's
The objection by the U.S. Trustee, which typically oversees
the administration of bankruptcy cases and polices them for
conflicts, threatens to derail Abengoa's high-stakes debt
restructuring plan to avoid its own bankruptcy in Spain.
Abengoa, a renewable and engineering company with a global
footprint, has already received approval from its shareholders
and a Spanish court to cut $10 billion of debt, but parts of the
complex plan hinge on the successful reorganization of its U.S.
Abengoa did not immediately return a request for comment.
The Spanish company put its U.S. subsidiaries, including
Abeinsa, in Chapter 11 this year while it negotiated its
so-called master restructuring agreement (MRA), or debt plan, to
avoid becoming Spain's largest-ever corporate failure.
Under Abeinsa's reorganization plan, Abengoa will contribute
$20 million in exchange for retaining its equity stake in the
U.S. company. Abengoa will also be released from potential
fraudulent transfer claims involving another U.S. subsidiary,
Nasdaq-listed Atlantica Yield Plc.
In a filing with the U.S. Bankruptcy Court in Delaware, the
U.S. Trustee said Abeinsa's plan may not comply with federal
laws and regulations and should not be confirmed by the court.
"Failure to win court backing would be a significant issue
for Abengoa and a delay would be detrimental too," said Joshua
Friedman, a legal analyst for Debtwire. "Confirming a Chapter 11
plan is vital to its debt restructuring agreement."
Aside from criticizing the broad releases from lawsuits, the
watchdog said Abengoa's plan to retain an equity stake in
Abeinsa even though the U.S. unit's creditors are not being paid
in full violates the U.S. Bankruptcy Code.
The U.S. Trustee said the U.S. reorganization may also fail
to provide "sufficient, or sufficiently convincing" financial
information and may not meet feasibility requirements.
Abeinsa's bankruptcy exit plan has also raised objections
from a string of creditors as well as the U.S. government, on
behalf of the Department of Energy and the Federal
Communications Commission, and the U.S. Internal Revenue
Abeinsa's bankruptcy confirmation is set for trial in
Delaware on Dec. 6.
(Additional reporting by Jose Elias Rodriguez in Madrid)