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Spain's ACS issues bonds against Iberdrola shares
October 4, 2013 / 6:06 PM / 4 years ago

Spain's ACS issues bonds against Iberdrola shares

MADRID (Reuters) - Spanish builder ACS (ACS.MC) has issued 721.1 million euros ($980.4 million) of five-year bonds that can be exchanged into shares of power company Iberdrola (IBE.MC), in which it has a small stake.

ACS, which built up a stake in Iberdrola as a way to diversify, has cut its holding after a share price slump in the power firm. The stake has gone from 14.85 percent last year to 5.64 percent, mostly tied up in complex financial instruments.

The company said it would use the funds to cancel more expensive financing it has with French bank Natixis, lowering its cost of debt. The operation will eventually further lower ACS’s stake in Iberdrola, and one analyst said it may net ACS cash to pay down its 6 billion euros of debt.

“It is positive that ACS is partially cancelling its off-balance sheet exposure to Iberdrola and issuing a bond with a lower cost of debt than the current equity swap financing,” said Espirito Santo analyst Juan Carlos Calvo.

“The eventual cancellation of the entire derivatives exposure to Iberdrola could release around 500 million euros of cash, as the share price of Iberdrola is higher now than at the time of contracting the derivatives. This could be used to reduce the group net debt.”

The bonds are being marketed to institutional investors. ACS said 5.7688 euros of the bonds can be swapped for each share of Iberdrola while the bonds will pay a coupon of 2.625 percent.

At market close on Friday, ACS’s share price stood at 24.09 euros and Iberdrola’s at 4.308 euros.

ACS, which has focused on overseas expansion to cut its exposure to recession-hit Spain, borrowed heavily to build its stake in Iberdrola, but last year took a 2.6 billion euro hit on its holding.

Natixis, Santander, Deutsche, HSBC and Societe Generale are acting as bookrunners for the deal.

($1 = 0.7340 euros)

Reporting by Sonya Dowsett and Sarah White; Editing by Patrick Lannin and David Evans

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