MADRID Feb 19 A Spanish government working
group will discuss changing the status of a state-backed
guarantee given to builder Sacyr to secure a contract
to widen the Panama Canal on Thursday, two sources with
knowledge of the matter said.
The government is considering changing the contract of the
guarantee, worth around $200 million and given to Sacyr in 2009,
into backing for a loan to get the project finished from a
guarantee that pays out in case the project is not completed,
the sources said.
The guarantee was originally drawn up by Spanish
state-backed insurer Cesce as a counter guarantee to a $400
million insurance bond from Zurich that backed the
Sacyr declined to comment. Cesce declined to comment. The
Economy Ministry declined to comment.
The disagreement between Panama and a Sacyr-led consortium
over $1.6 billion in cost overruns and how to maintain financing
has already halted work on the project for two weeks and has
delayed its projected completion until at least December 2015.
One of the sources said on Wednesday it was likely the
working group would agree to change the nature of the
state-backed guarantee, as it was important for Spanish business
for the high-profile project to get up and running again.
"It's very likely that the working group will agree tomorrow
to let the Cesce guarantee convert into a guarantee for Sacyr to
get more funding," the source said.
A major sticking point in negotiations between the two
parties is the conversion of a $400 million bond from insurer
Zurich North America into backing for a loan so the consortium
can secure a short-term cash injection needed to continue its
work, sources familiar with the talks said earlier this week.
The consortium took out the bond as a required insurance
policy in case it did not finish the project. The bond is
payable if the project is not completed by the consortium for
(Reporting by Sonya Dowsett and Jose Elias Rodriguez, Editing
by Sarah White and Louise Heavens)