September 24, 2015 / 6:15 AM / 4 years ago

UPDATE 2-Indebted Abengoa gets creditor backing for cash call

(Adds shares, analyst comment, background)

By Jose Elías Rodríguez and Sonya Dowsett

MADRID, Sept 24 (Reuters) - Spanish energy company Abengoa said on Thursday its major creditors had agreed to back most of a 650 million euro ($728 million) share sale in a deal providing vital funds to cut debt and cover cash flow needs.

The Seville-based engineering and renewable energy firm, which has biofuel and solar-heated power plants in the United States, had lost over half its market value since the share issue was announced in early August on concerns banks would not underwrite it.

Banks Santander, HSBC and Credit Agricole would back the cash call for up to 465 million euros ($522 million), the company said on Thursday. Its shares rose over 10 percent when the market opened before retreating to Wednesday’s closing levels. Bonds rallied strongly.

“This is a positive development for Abengoa after (previous) news that the banks were not willing to underwrite the capital increase. However we think it will take time and delivery of the goals to regain investor confidence,” said Nuno Estacio, analyst at Haitong Research.

Shareholder Inversion Corporativa, run by the founding Benjumea family, will invest at least 120 million euros in the capital hike, while U.S. fund manager Waddell & Reed will invest 65 million euros through its funds, the company said.

Inversion Corporativa has agreed to cap its voting rights at 40 percent after the share issue and will lose its majority status.

Executive Chairman Felipe Benjumea, whose father founded the company, will step down after 25 years in the position to be replaced by Jose Dominguez Abascal, the company’s former chief technology officer, in a non-executive role.

CULTURE CHANGE?

“The departure of (Felipe) Benjumea was the main stumbling block in the talks, not the price,” said one source with knowledge of the negotiations. “The move clears the horizon for the company as it signals a change of culture.”

The former chairman’s father, Javier Benjumea, founded Abengoa in 1941 with three friends and other family members to undertake electrical supply projects. Felipe, his son, took over the chairmanship from him in the early 1990s.

Abengoa, which issued a profit warning in July, said it would cancel its dividend, step up asset sales and cap investments as part of the refinancing plan while making debt reduction a priority.

The company will hold a conference call at 1300 CET (1100 GMT) to give more detail on the moves, but will not answer questions afterwards, it said. It will hold a shareholders’ meeting on Oct. 10 to approve the issue, it said.

Abengoa, whose debt is rated below investment grade by major agencies Moody’s and S&P, wants to cut debt and improve its rating. Net debt was 6.6 billion euros at end June, dwarfing a market value of less than 1 billion euros.

Abengoa’s bonds traded up strongly in the secondary market on Thursday on news of the creditor backing but remained at deeply distressed levels.

The company’s 375 million euro 7 percent 2020 note traded up from a cash price bid of 37 to 53, just over half of its face value and equating to a yield of 25 percent. ($1 = 0.8917 euros) (Additional reporting by Julien Toyer and Tomas Cobos in Madrid and Robert Smith in London; Writing by Sonya Dowsett; editing by Adrian Croft)

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