Sacyr buys time for Repsol after Itinere sale

By Paul Day and Tracy Rucinski

MADRID (Reuters) - Sacyr Vallehermoso's (SVO.MC) 7.9 billion euro ($10.22 billion) sale of its highway business to a private equity fund owned by Citigroup (C.N) on Monday will reduce the Spanish builder's massive debt pile and ease mounting pressure to sell its stake in Repsol (REP.MC).

Last week, Sacyr was close to striking a deal with Russia's LUKOIL (LKOH.MM) over its 20 percent stake in Repsol (REP.MC), one of several assets it had put up for sale to ease a massive debt pile during a housing slump.

Sacyr will book 2.874 billion euros from the sale of Itinere and pass 5.013 billion of debt on to Citigroup Infrastructure Investors, cutting the constructor's total debt by over a third to 12.5 billion euros from January 1.

Sacyr's share price has lost over 69 percent of its value since the start of the year, compared to a 39-percent drop in Spain's blue-chip index, as dealers shied away from constructors considered especially vulnerable to the downturn.

At 9:45 a.m. EST, shares in Sacyr were 4.63 percent higher at 7.91 while Itinere traded up 14.54 percent at 3.86, outperforming a 3.41 percent fall on Spain's blue-chip IBEX-35 index .IBEX, after both stocks were suspended on Monday before the market opened.

While Sacyr directors said at a news conference on Monday that it will continue to negotiate the sale of its Repsol stake, analysts said the Itinere deal has brought Sacyr a window of time with its creditors.

"With this operation Sacyr reduces gearing, but most importantly it would solve its refinancing needs for the next 15 months," Merrill Lynch analysts said in a note.

They added, however, that additional liquidity requirements would derive from the Repsol stake if the share price went below 12 euros per share.

A senior London-based banker said: "Sacyr has been pushed by the government to strike a deal with Citigroup over Itinere to give some relief over pressure to sell Repsol.

"The Repsol deal will probably not happen now."

DEFENSIVE ASSET

Itinere -- which operates highway concessions in Brazil, Chile, Spain and Portugal -- was considered a defensive asset for Sacyr as Spanish constructors were hit hard by the dual blow of the global credit crunch and a sudden slump in the domestic real estate market.

Sacyr's agreed price for Itinere of 2.9 billion euros plus 5 billion euros in debt is at a considerable discount to estimates at the beginning of November when analysts said the highway unit would fetch around 3.9 billion euros plus debt.

"(Citigroup Infrastructure) is buying portfolio and know-how and at a good price, putting them in a good position to take part in future infrastructure opportunities, particularly in the United States," the head of Spanish private equity association Ascri, Jaime Hernandez Soto, said.

"There is currently a lot of interest from private equity groups in non core assets being sold off by other Spanish builders such as Acciona," he added.