March 9, 2016 / 4:57 PM / 2 years ago

Abengoa creditors agree draft rescue deal but hurdles remain

* Creditors would inject 1.2 bln euros in cash

* Deal also involves debt-for-equity swap

* Agreement has to be endorsed by Abengoa, more creditors

By Jose Elías Rodríguez and Jesús Aguado

MADRID, March 9 (Reuters) - The creditors of Spain’s Abengoa have reached agreement on a proposal to cut the energy company’s debt and inject fresh cash, a source close to the talks said on Wednesday, though several hurdles stand in the way of a deal to save the group from bankruptcy.

Having last year entered into pre-insolvency proceedings, the debt-laden company is racing to reach an agreement with its banks and bondholders by March 28.

According to the source, creditors have agreed to extend to Abengoa a 1.2 billion euro ($1.3 billion) loan at an 18 percent interest rate to cover its needs until the end of 2017, with about 1 billion euros coming from bondholders and up to 150 million euros put up by the banks.

About two thirds of Abengoa’s 9.4 billion euros of debt would also be swapped for equity while another 500 million euros of existing loans would be refinanced and lenders would provide an additional 800 million euros in financial guarantees to develop projects, the source added.

Under the agreement, those entities extending the new 1.2 billion euro loan would receive 55 percent of the company in exchange for the money. Creditors swapping existing holdings for equity would receive 40 percent of Abengoa and current shareholders would be left with 5 percent.

Both creditors and Abengoa declined to comment.

However, several hurdles still need to be negotiated if Abengoa is to avoid becoming Spain’s biggest bankruptcy.

“There is a draft deal between banks and bondholders, but it now has to be endorsed by the company and creditors holding at least 75 percent of Abengoa’s debt,” the source said on condition of anonymity.

Those two conditions may be hard to satisfy before the March 28 deadline.

While Abengoa’s majority shareholder has agreed in principle to cut its stake to 5 percent as part of the restructuring, sources close to the company say that nothing has been signed and former executive chairman Felipe Benjumea, who indirectly owns 51 percent of the company, could still change his mind.

Separately, the deal has been backed by creditors representing about 40 percent of the debt and convincing the additional 35 percent needed to push the it through may prove difficult in less than three weeks.

Abengoa, which started out 70 years ago as an engineering business in Seville and expanded into clean energy by taking on huge debts, was forced to its knees last year when its lenders refused to extend credit lines.

The company last week reported a 1.2 billion euro loss for 2015. ($1 = 0.9123 euros) (Editing by Julien Toyer and David Goodman)

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