Did Moody’s Just Sever Energy Giant’s Last Life Line?

Out-of-money Abengoa, felled by debt and shady accounting.

Few companies epitomize the failings, follies and foibles of today’s age of hyper-financialized, super-crony capitalism quite like Spain’s teetering green-energy giant Abengoa. The firm came within inches of becoming Spain’s biggest ever bankruptcy last year after embarking on a suicidal multi-year international expansion program fueled by exceedingly generous renewable energy subsidies and massive helpings of bank and corporate debt.

But the subsidies were abruptly taken away when the Spanish government changed. When it had trouble dealing with its debt, the company began hiding it through increasingly complex financial vehicles set up, of course, in the City of London. As Abengoa’s then-CEO Manuel Sánchez Ortega crowed at the time, when things get serious, you need to have your wits about you, and “Abengoa has always been at the leading edge of financialization.”

Last year Abengoa’s off-balance sheet debt load became so unwieldy that it could no longer be hidden. In August the company announced that it would need a new capital expansion, which triggered a massive shareholder exodus and the collapse of its share price. By November things were so bad that even Deloitte, its trusted auditor, refused to sign off on the firm’s accounts, leaving management with little choice but to announce that it was seeking preliminary protection from creditors.

By that time Sánchez Ortega was gone, having taken a new job with the world’s biggest investment fund, BlackRock, which took a massive short position against Abengoa just weeks after his appointment. Blackrock is also now the proud owner of 563,000 shares of Abengoa’s renamed, rebranded U.S subsidiary, Atlantic Yield.

In February this year, its US unit Abengoa Bioenergy US Holding filed for chapter 11 bankruptcy in the US. In March, the parent company in Spain filed for chapter 15 bankruptcy in US to get access to protection in the US courts.

Back in Spain, Abengoa is apparently back on the mend after nine months of intense negotiations with its creditors and a massive divestment program. Last week the firm announced that it expects to win the approval of at least 75% of its creditors for a restructuring plan by Sept. 30. The banks and hedge funds that own most of its unpaid debt are already on board.

But not everyone’s convinced…

Continue reading the article at WOLF STREET

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