December 7, 2015 / 4:10 PM / 4 years ago

Clock ticks as Abengoa's banks seek guarantee to extend lifeline-sources

* Abengoa needs 100 mln euros in next few days

* Banks ready to extend lifeline but seek guarantees

* Stake in Abengoa Yield could be used as collateral

* Key meeting scheduled on Wednesday

By Julien Toyer and Carlos Ruano

MADRID, Dec 7 (Reuters) - Spain’s Abengoa, facing a cash crunch in the next week, is negotiating a multi-million euro lifeline with creditor banks which have asked the company to guarantee with new assets, sources familiar with the talks said on Monday.

The engineering and renewable energy group, which has biofuel and solar-heated power plants in the United States and operates assets in a dozen countries across four continents, is on the verge of becoming Spain’s biggest-ever bankruptcy.

Having struggled with big debts for more than a year, Abengoa triggered pre-insolvency proceedings last month after a key investor backed away from a plan to inject about 350 million euros ($378 million) into the company.

It needs 100 million euros to pay salaries by the middle of this month and to keep its business running. Further out, it needs up to another 350 million euros in extra cash to stay afloat over the next four months - the maximum time allowed to renegotiate its debt under Spanish law.

Spanish and international banks’ total exposure to Abengoa stands at around 20.2 billion euros, including financing for projects, a source familiar with the matter said at the end of September.

Abengoa’s shares have dropped more than 90 percent since a peak in September 2014, wiping out around 4 billion euros in market value.

Three sources familiar with the talks said that the banks, while being open to injecting more money into the group, would be likely to offer something less, between 300 million and 400 million euros in total, and seek a liquid asset as a guarantee.

“Two things are being looked at: the liquidity that is needed and the guarantees that can be offered,” one of the sources said on condition of anonymity.

Two of the sources said the 47 percent stake Abengoa holds in U.S.-listed Abengoa Yield, currently worth around 644 million euros, is one of the options most seriously looked at as a potential collateral.

Abengoa said on Monday that KPMG, which advises the banks, would produce a comprehensive report on the group’s financial state “in the first part of the week.” A meeting is scheduled on Wednesday to discuss this report and reach a deal, it also said.

Seville-based Abengoa also said it had hired consultancy Alvarez & Marsal at the request of the banks to move forward with its restructuring and design a new strategic plan.

One of the sources said Abengoa had committed with lenders to deliver savings of up to 40 percent and cut as many as 4,000 jobs, or about 15 percent of is workforce worldwide.

It has already halted work at several plants or construction sites in Brazil and the U.S. and started to cut jobs at its Seville headquarters, the sources said. ($1 = 0.9252 euros) (Reporting by Julien Toyer. Editing by Jane Merriman)

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