UPDATE 1-Spain's Isolux starts proceedings to avoid insolvency

(Adds details from the company’s statement, background)

MADRID, March 31 (Reuters) - Spanish engineering company Isolux said on Friday it had activated the formal process aimed at avoiding insolvency, as it battles to secure enough money to remain in business.

Under Spanish law, companies can enter into debt restructuring proceedings that give them up to four months to reach an agreement with creditors to avoid a full-blown insolvency process and a potential bankruptcy.

Isolux has over 2 billion euros ($2.1 billion) in restructured debt, according to an update on its restructuring process published in December.

Spanish engineering companies have been struggling to meet debt obligations and shrink their businesses after more than a decade of debt-fueled expansion projects worldwide.

Renewable energy firm Abengoa narrowly avoided filing for Spain’s biggest ever bankruptcy last year after it secured backing from creditors for a restructuring plan to cut its debt of over 9 billion euros.

Isolux said on Friday the decision taken by the board would not affect its capacity to carry out operations, in particular any projects started in recent months.

Last December, Isolux agreed to a debt restructuring deal with bondholders and banks, such as Banco Santander, Caixabank and Bankia, taking 95 percent of the company in a debt for equity swap.

Isolux said on Friday it was trying to sell its concession assets and had begun to look for an investor for the holding company that groups the engineering and construction business.

The company, which has over 5,200 workers, carries out infrastructure and energy projects in 35 countries. It has delayed the publication of its results until negotiations are concluded.

$1 = 0.9360 euros Reporting By Andrés González; Writing by Jesús Aguado; Editing by Angus Berwick and Mark Potter