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Stranded Assets: Renewables Group Faces Largest Bankruptcy In Spanish History

Tobias Buck and Thomas Hale, Financial Times

Abengoa, the Spanish renewables company, announced the start of insolvency proceedings on Wednesday, sending shares in Spanish banks tumbling on concerns that the country’s lenders may be left with heavy losses. A possible default would likely count as the largest bankruptcy in Spanish history.

The company said it had been forced to seek creditor protection after a potential investor cancelled plans to inject €350m into the heavily indebted group. The Seville-based renewables specialist now has up to four months to raise capital elsewhere, but bankers in Madrid sounded a sceptical note over its chances of finding new investors.

“It looks like nobody is willing to put money into this company, especially once they have looked at the books in detail,” one banker said, adding: “There is a lot of debt that won’t be recovered.”

Some analysts suggested the troubles at Abengoa were a symptom of a wider problem for Spain’s banks. “We don’t believe that this should be viewed as a one-off. To our minds the events here show that Spanish banks have yet to take losses on a lot of debt,” said Andrew Lowe, an analyst at Berenberg. “While they’ve cleaned up the real estate problems, they now have to tackle the forbearance issue in Spain.”

Part of Abengoa’s troubles hark back to Spain’s 2013 energy reform, which slashed subsidies for renewable energy providers after years of generous support. But the company, which is active both as an operator and as an engineering and construction business in the renewable sector, has also suffered as a consequence of its decision to pile on debt. As of September, Abengoa carried gross debt of €8.9bn. Adding in the billions of euros that Abengoa still owes to providers, a possible future default would likely count as the largest bankruptcy in Spanish history.

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