Abengoa SA has filed for bankruptcy protection in the U.S. as the Spanish energy company continues talks with its banks and bondholders to agree on its plan to restructure billions of dollars in debt.
The renewable energy company, which operates around the world, on Monday night filed for chapter 15 protection, the section of the U.S. bankruptcy code dealing with cross-border insolvencies, in U.S. Bankruptcy Court in Wilmington, Del.
The bankruptcy filing comes after Abengoa struck a deal with key creditors that gives it more time—through Oct. 28—to continue negotiations on restructuring its debts, which court papers show total more than €14.6 billion ($16.48 billion). The company hopes the U.S. bankruptcy will provide extra breathing room for these talks.
“It is my belief that the relief requested in the petition and related motions is necessary…to protect the U.S. assets of the petitioning group members and to prevent creditors from taking actions in the U.S. under U.S. law in a way that could frustrate the group’s efforts to agree a restructuring,” Abengoa lawyer Borja Fernández de Trocóniz said in court papers.
Under a restructuring plan floated to creditors earlier this month, which was described in filings with the U.S. Bankruptcy Court, the new Abengoa would cut costs, shed noncore assets and emerge as a slimmer business valued at €5.395 billion with €4.9 billion in debt.
Ownership of the restructured company would largely fall to existing creditors and new-money lenders, though the plan envisions current shareholders hanging on to about 5% of its equity.
Creditors that have preliminarily pledged their support for the restructuring include banks like Banco Popular, Banco Santander and Bankia, as well as bondholders like Centerbridge Partners, D.E. Shaw, Elliott Management and KKR & Co. Court filings show the latter creditors are part of a group that has considered offering more than $1 billion in new financing meant to “reinvigorate” Abengoa in connection with its restructuring.
Abengoa is one of the world’s top builders of power lines transporting energy across Latin America and a top engineering and construction business, making large renewable-energy power plants in places from Kansas to the U.K.
The embattled company, the flagship of Spain’s renewable energy industry, has been in talks for months with creditors to avoid what would be one of the country’s biggest bankruptcies.
In November, the company sought preliminary protection under Spanish insolvency law and is working with creditors on the parameters of a restructuring plan.
Under chapter 15, a company seeks a U.S. Bankruptcy Court’s recognition of a foreign bankruptcy case—in this case the Spanish proceeding—as the main, or controlling, case. If recognized by a U.S. judge, the Seville-based energy company will receive the benefits of U.S. bankruptcy law, including the so-called automatic stay that halts lawsuits and prevents creditors from seizing assets.
Abengoa, which last month put some of its U.S. business into chapter 11 bankruptcy protection, said it also intends to put its remaining U.S. registered affiliates into chapter 11 protection.
Abengoa’s financial woes trace back to Spain’s boom years, when the company began to build such projects for itself, fueled by cheaper bank loans and a desire to expand. The company took on billions of dollars of debt in anticipation of a growth rate that didn’t materialize.