Spain-based renewables firm Abengoa began insolvency proceedings yesterday after Gonvarri, an arm of industrial group Gestamp, decided against a plan to invest around €350 million (US$371 million) into the company.
As a result Abengoa’s share price also slumped by 54% on Wednesday taking out €470 million in market value, said a Reuters report. Abengoa now has up to four months to reach an agreement with creditors to evade a full insolvency and potential bankruptcy, which could be Spain’s largest bankruptcy in history.
In a statement the firm said: “The company will begin the negotiating process with its creditors with the aim to reach an accord to guarantee the financial viability under the Article 5 of the Bankruptcy act, which the company intends to request as soon as possible.”
Gonvarri's plan to invest in Abengoa had been conditional on banks underwriting the issue and it had also asked the banks to inject €1.5 billion into the company, sources told Reuters.
Earlier this month, Abengoa's auditor Deloitte said the firm's future was heavily dependent on the proposed deal with Gonvarri and it faces significant risks.
Abengoa, which is based in Seville, employs around 24,000 people globally and specialises in turnkey PV, solar thermal, solar-gas hybrid and conventional generation plants, among others.
The company has had troubles with high debts for a year. In July it cut its 2015 targets and stepped up an asset sales plan on 31 July, but announced a share issue shortly afterwards. As a result the company’s market value has decreased by 85% over uncertainties on whether creditor banks would agree to back the issue.
Abengoa will be removed from Spain’s blue-chip index Ibex tomorrow, according to the stock market operator.
In July, major names including Bank of America, Citigroup, Barclays and UBS helped Abengoa Yield, the yieldco established by Abengoa, to more than double its credit facility from US$125 million to US$290 million.