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Abengoa bankruptcy update

Abengoa bankruptcy update

  • 03/12/2015

According to the latest information, KPMG has been appointed by Seville’s Commercial Court nº 2 as mediator in order to try to reach an agreement with the financial creditors at Abengoa’s pre-insolvency filing (“APF”). On that regard it is important to highlight that this kind of mediation is not contemplated under Spanish Insolvency Law (“LC”) that only admits it when a request for an Out-of-Court payment agreement is requested, what is not Abengoa’s case and, moreover, even if the Judge would consider such mediation applicable, it is a non-binding mediation.

The media has reported that a Financial Creditor’s Committee (“FCC”) has been created. It seems it has been a self-appointed committee, where four Spanish Entities are included: CaixaBank; Santander; Bankia; Sabadell and Popular, jointly with three foreign entities, HSBC; Credit Agricole and EKN. It is important to note that this kind of committees do not exist under Spanish Insolvency Law and this may create, in our opinion, a high degree of confusion to other financial creditors that may think that FCC has a certain degree of capacity to represent them in front of Abengoa, or to make or enforce proposals, which is not the case.

A significant part of Abengoa’s financial debt is related to project finance. Those debtors would not be affected by Abengoa’s APF and its only concern would be the performance of the project itself.

The rest of financial creditors are distributed between many subsidiaries around the world, being difficult to identify at this stage which amount of such debt is related to the mother company and could be submitted to the LC’s pre-insolvency rules.

In our opinion, the strategy Abengoa is trying to follow is to take advantage of the confusion created in order to try to apply to all financial creditors a hard restructuring based of non-existing cram down majority rules that are not applicable to the case as the debt is distributed amongst the different companies of Abengoa’s Group. In Spain as in most of the jurisdictions around the world, there are no rules that apply to the Insolvency of Group Companies.

Due to all of the above mentioned, in the event of receiving some notice from the FCC or some refinancing proposal it is important to have the appropriate advice under Spanish Law in order to avoid accepting commitments that legally should not be accepted under Spanish Law.

If you need any further information about the Spanish pre-insolvency system, you can find it clicking here. For further clarifications, please, do not hesitate to contact Agustín Bou (abou@jausaslegal.com), head of the Restructuring and Insolvency Department.

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