Consortium Cuts Debt Load in Abertis Purchase

MADRID (Reuters) – The consortium preparing to buy infrastructure operator Abertis (ABE.MC) will take on a third less debt after some banks left its lending syndicate, a source close to the situation said, reflecting tough credit conditions in Spain.

Private equity firm CVC Capital Partners [CVC.UL] and existing shareholders ACS (ACS.MC) and La Caixa’s investment arm Criteria CRI.MC plan to put debt and equity into an investment vehicle and launch a takeover of Abertis, which has a market capitalisation of 10.75 billion euros ($13.5 billion). [ID:nLDE664148]

Six out of an original 21 banks in a lending syndicate that had been planning to provide 8 billion euros for the acquisition have left the deal, scaling back the debt to close to 5 billion euros, the source said on condition of anonymity.

Spanish infrastructure deals, like ACS’s sale of its Spanish ports and the divestment of Endesa’s (ELE.MC) Spanish gas grid, have run up against a reluctance among some banks to provide credit approval during Spain’s financial downturn.

On Thursday, The Financial Times reported the consortium’s bid would still value the equity of Abertis at 12 billion euros, implying an offer for the toll road, airports and telecoms group of at least 16 euros per share.

Representatives of ACS, Criteria and Abertis declined to comment, while a CVC spokeswoman did not respond to a request for comment.

Abertis shares rose on Thursday as investors were encouraged by the suggestion the consortium was prepared to put up more equity for their bid in light of the reduced debt. They ended 3.8 percent higher at 14.60 euros.

ACS shares closed up 0.3 percent, while Madrid’s blue-chip index .IBEX closed up 0.93 percent.

A separate source familiar with the matter told Reuters on Tuesday that Criteria, which owns 28.5 percent of Abertis, was targeting a stake of more than 28 percent after the buyout, while CVC’s stake would be slightly less and ACS’s stake would be about 20 percent.

Separately, ACS told Spanish stock market regulators late on Thursday that it had lent French bank Societe Generale SOGC.PA a 3 percent stake in Abertis, cutting its direct stake in the motorway company to 22.8 percent from 25.8 percent previously.

An ACS representative was not available to say whether the move was related to attempts by the consortium to secure further financing for its planned bid.

FINANCIAL ENGINEERING

The consortium’s move to create and leverage on a new holding company — at a challenging time for complex financial deals in debt-hit Spain — would allow the partners to extract much-needed cash while keeping control of the operating company.

Were ACS to sell Abertis shares to the acquisition vehicle while taking a stake in the vehicle itself, it could raise the 2 billion euros it needs to realise its ambition of raising its 12 percent stake in Spanish utility Iberdrola (IBE.MC) to more than 20 percent.

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

For a calculator on how much cash the Spanish motorway group’s core shareholders can extract while retaining control:

link.reuters.com/cuz26m

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

For La Caixa, Spain’s third-largest bank, the cash would help improve capital ratios in the face of new capital and liquidity requirements under Basel III.

At the same time as withdrawing cash, however, the consortium will need to ensure Abertis’ credit rating is not damaged, said UniCredit analyst Rocco Schilling.

“CVC, Abertis and Criteria should look to finance the deal in a more conservative way, say 40 percent equity and 60 percent debt, in order to keep the investment grade rating that Abertis wants to keep after the deal is done,” he said.

Industry experts say the consortium will likely sell Abertis’ non-core assets following the acquisition, with a 14.6 percent stake in Portugal’s Brisa (BRI.LS), a 6.7 percent stake in Italy‘s Atlantia (ATL.MI) and a 32 percent stake in France’s Eutelsat (ETL.PA) the most likely candidates.

These stakes could fetch 3 billion euros, according to market analysts, allowing the consortium to lower the company’s gearing. Abertis has net debt of some 14.5 billion euros. ($1=.7939 Euro)

By Andres Gonzalez and Nigel Davies
(Writing by Greg Roumeliotis, additional writing by Jonathan Gleave; editing by Simon Jessop and Matthew Lewis)