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By Carlos Ruano and Jose Elias Rodriguez
MADRID Dec 10 Spanish engineering group Abengoa and creditor banks agreed on Thursday to put on hold an option of selling shares in its Abengoa Yield business as a means of raising money, two banking sources briefed on the talks said.
Abengoa, trying to avoid becoming Spain's biggest-ever bankruptcy, is negotiating a multi-million-euro lifeline with creditor banks which have asked the company to guarantee it with assets.
Having struggled with big debts for more than a year, Abengoa triggered pre-insolvency proceedings last month after a key investor backed away from a plan to inject new cash.
The engineering and renewable energy group has agreed to look for financial investors willing to inject emergency funds, although creditor banks will consider putting up 100 million euros ($109 million) in cash if Abengoa cannot find alternative funding in coming days, the sources, speaking on condition of anonymity, said.
Banks' total exposure to Abengoa stands at around 20.2 billion euros ($22.10 billion), including financing for projects, a source familiar with the matter said at the end of September.
Banks had been pressing Abengoa - which has biofuel and solar-heated power plants in the United States - to sell assets immediately, including a 47 percent stake in U. S.-listed Abengoa Yield.
But at a meeting on Thursday between Abengoa, creditor banks and KPMG, which advises the banks, that idea was put on hold, the sources said.
"Abengoa explained that the partial sale (of Abengoa's stake) in Abengoa Yield might cause a rapid loss in value (of the Yield shares)," one banking source said.
There were also concerns that, by selling a portion of its stake, Abengoa would miss out on the premium that a potential sale of its entire stake would fetch.
Abengoa is now expected to try and tap hedge funds or other financial investors for funds.
"If in the coming days, there is no progress in this search, the banks would consider a (cash) injection to deal with immediate needs of around 100 million euros," the source said.
Abengoa declined to comment.
Banks are still insisting on guarantees before they provide any fresh cash, the source said. Bondholders are also willing to inject fresh capital in Abengoa if the bank lenders stump up emergency funds first, LPC, a Thomson Reuters loan market news service, reported.
The deadline for Abengoa to come up with the emergency cash injection, needed to cover a Christmas payment to staff and urgent supplier payments, is seen as around Dec. 20, which is also the date of Spain's general election.
While Abengoa's difficulties have not had a significant political impact so far, this might change if they lead to job losses. The group employs 24,000 people worldwide, 7,000 of them in Spain. ($1 = 0.9138 euros) (Additional reporting by Angus Berwick, writing by Sonya Dowsett and Adrian Croft. Editing by Jane Merriman)
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