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Spain’s Abengoa reaches preliminary deal with creditors to avoid bankruptcy

Spain’s Abengoa said Thursday it had reached a preliminary agreement with its creditors aimed at staving off bankruptcy that could see them take control of the renewable energy giant.

Abengoa has been racing to restructure its debt ahead of a March 28 deadline or face going under, in what would be one of Spain’s biggest corporate failures.

The preliminary deal with its main bankers and bondholders foresees the “restructuring of its financial debt and the group’s recapitalisation”, as well as a 1.5-1.8-billion-euro ($1.7-2.0 billion) injection, the company said in a statement.

In return, the creditors — which include Spain’s Banco Santander, HSBC and France’s Credit Agricole — would take control of at least 90 percent of the company, which employed some 28,700 people worldwide at the end of September.

The group’s current shareholders, which include the founding Benjumea family, would be left with just five percent of the company.

But the preliminary deal must still be approved by creditors holding at least three quarters of its debt before the March 28 deadline.

“Doubts remain but I think this plan is positive,” said Ivan San Felix, an analyst at financial group Renta 4.

Abengoa can now “move forward, which seemed near impossible several months ago.”

The heirs of Javier Benjumea, who founded the Sevillan group 75 years ago, have gradually been marginalised by the banks which have criticised their management of the world player in solar and wind power, biofuels and water management.

Deemed a Spanish industrial jewel, US President Barack Obama picked it in 2010 to build one of the biggest solar plants in the world in Arizona.

But in November the group announced it was close to bankruptcy following years of unsustainable expansion and filed for protection from creditors.

Over the years, Abengoa built up a debt mountain that stood at 9.4 billion euros at the end of 2015.

And it posted a loss of 1.2 billion euros last year.

In a bid to stave off bankruptcy, the board approved a recovery plan in January that entails the sale of assets in the biofuels sector and focuses on its engineering and construction activities.

Under the plan, Abengoa is speeding up the sale of non-strategic assets.

It has sold the shares of a 100 megawatt thermal-solar power plant in the United Arab Emirates and has reached an agreement to sell its former headquarters in Madrid, it said.