Case Study

How a business insolvency secured a

good fate for the Spanish economy
Abengoa Group and EY teams collaborated to keep a vital regional construction
company with a large global presence in business.

 1. Better question
 2. Better answer
 3. Better working world
 How EY can help

1
The better the question

How can a proposed business insolvency solve economic problems?

Abengoa Group had deep roots in the Spanish economy, with more at stake than in a

typical insolvency
With a rich history dating back more than 80 years, Abengoa Group (Abengoa) is a
construction company recognized worldwide for the execution of its renewable
energy and water projects.

With a geographical presence that spans 25 countries, annual sales of €1,500m and

more than 11,000 employees, Abengoa plays a pivotal role in the wider Spanish

economy. “Abengoa is important in terms of footprint and the Spanish image,”

explains Jose Carlos Cuevas, Partner at EY-Parthenon Turnaround & Restructuring

Strategy.
Abengoa is important in terms of footprint and the Spanish image

José Carlos Cuevas

Partner, Turnaround and Restructuring, Ernst & Young, S.L.

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The Group’s position within the wider economy therefore made this specific

engagement particularly impactful, important and challenging.

Initial attempts
Cuevas sums up the challenge faced by Abengoa quite simply as one that involved

“lack of cash” and by 2014, Abengoa had a total debt of around €20b, which was

unsustainable.

Given these figures, in November 2015, Abengoa decided to resort to pre-bankruptcy

to reach an agreement that would hopefully guarantee its financial viability.

However, this was not successful, and by 2017 and 2019 two debt restructurings had

taken place. In August 2020, “Plan Vellocino” was proposed, with new payment

plans, government support and bonding line proposals.

Despite all these attempts, by the end of 2020, the situation hadn’t improved and

Abengoa still had debt reaching close to €6,000m. In addition, the regional

government, Junta de Andalucía, refused to contribute €20m to aid Abengoa.

By February 2021, this string of events left Abengoa at a crucial crossroads – and the

Board of Abengoa requested bankruptcy for the parent company, Abengoa SA.
2
The better the answer

A persistent EY-Parthenon team found the right buyer

Abengoa and EY-Parthenon battled media attention, collaborating to secure the right

purchasing offer

EY-Parthenon teams were appointed as insolvency administrators in March 2021.

From the start, a unique aspect to this engagement was the media attention. Given

the size and impact of this bankruptcy, this was a hurdle both Abengoa and EY-

Parthenon had to overcome and engage with regularly throughout the process.

Loan requests

Initially, the EY-Parthenon teams were asked to advise the bankruptcy of the parent

company, with the ambition to find an alternative way ahead for the subsidiaries of

Abengoa, where the majority of employees and debt were housed.

With support from EY teams, the subsidiaries requested help from the state-owned

company SEPI, who are often used as a tool to implement government policy.

The requested support consisted of the application for an ordinary loan of €203m

and a participative loan of €46m, together with a €200m bonding line backed by

CESCE (the Spanish Export Credit Agency).

Support denied

In June 2022, however, SEPI denied the support with which pre-bankruptcy was

requested by the operating subsidiaries, and in November 2022, the main

subsidiaries also entered bankruptcy, with EY-Parthenon teams now acting as

advisors on both processes.

As insolvency advisors responsible for both bankruptcy proceedings, EY-Parthenon

teams were faced with added complexity and new challenges to face. On top of this,

because of the high-profile status of the company, “many parties were trying to push

for a quick solution”, notes Cuevas.

With added pressure, EY-Parthenon teams were required to lead parallel,

overlapping processes that had the potential to significantly impact the Spanish

economy, making this particular engagement unique, with a lot at stake.

The scope of proceedings had substantially increased too: the initial bankruptcy of

the parent company involved less than €1,000m, whereas the bankruptcy of the

main Abengoa subsidiaries involved over €5,000m, approximately 11,000 employees

and technical project guarantees of €150m-200m.

In September 2022, a new legal framework around insolvency came into force in

Spain. This happened around the time of the second petition for Abengoa. The new

legislation was designed to improve the existing legal framework concerning pre-

bankruptcy and provide more alternatives. In the long run, this was helpful for both

EY teams and Abengoa, but navigating a new set of directives generated new

challenges and meant that the bankruptcy of the subsidiaries had to take place under

the new European bankruptcy legislations.

Top-class communication and cross-team collaboration

As insolvency administrators, the EY-Parthenon teams led the process and

communicated each step of both the old and new business insolvency frameworks

through meetings with the multiple parties, including company board and

management, investors, judges, more than 22 different financial institutions, public

bodies (Ministry, Export Credit Agency, Stock Exchange authorities) and other

advisors, ensuring that a fully transparent and agile process was employed.

Detailed communication addressed that stakeholders had timely access to consistent

and up-to-date information to facilitate informed decision-making.

Throughout the bankruptcy proceeding, EY-Parthenon teams brought to bear the

breadth of skill from across the firm to navigate these challenges and help that the

daily operational management of the subsidiaries to continue smoothly.

3
The better the world works

A global renewable energy company still stands

The sale of the company saved 11,000 jobs, allowing Abengoa to continue its good

work in the renewables sector

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Finding the right buyer

EY-Parthenon teams led the search for a suitable buyer. The last request for

bankruptcy was accompanied by a purchasing offer to maintain the activity and

employment of the group. Subsequently, more offers were received both for the

entire group (seven offers) or in some cases for some specific subsidiaries (five

offers).

EY professionals, as insolvency administrators, analyzed all offers, liaising with

multiple institutions and stakeholders to prepare in-depth reports in line with the

new legal insolvency framework and detailing the impacts of each bid on the group.

Ultimately, more than 175 reports were made for the judge, credit institutions and

public bodies to enable a truly informed decision and secure the right buyer for

Abengoa.

The Abengoa bankruptcy has been the second largest bankruptcy in the history of

Spain by amount of debt, and the first major bankruptcy under the new Bankruptcy

Law, which narrowed the terms and therefore proved a major challenge for EY teams

to overcome.

Abengoa carries huge weight in the economies of both Seville and Andalusia, and

generates enormous collateral employment throughout Spain. The sale to COX

Energy Group saved over 11,000 direct jobs and further ensures that Abengoa can

continue to make its valuable contributions to global renewable energy and water

projects.

For Antonio Medina Cuadros, Chief of Staff at Cox Energy America, the EY teams

were “Excellent, as insolvency administrators; in accordance with the law they have

always sought to preserve the interests of creditors and find a solution for the

continuity of the group to preserve employment and activity, but prioritizing the

rights of all creditors within the group. It was a magnificent effort”.

Alongside this, Cuadros points out that the positive contributions Abengoa has made

as a company are not lost through the sale, stating that Abengoa’s “spirit, technology,

capabilities, references, and experience in the renewable energy sector are not lost;

Cox Energy has taken that on. I believe that says it all”.