Sacyr Sells Highway Arm to Citi Infrastructure

MADRID (Reuters) – Sacyr Vallehermoso’s (SVO.MC: Quote, Profile, Research, Stock Buzz) 7.9 billion euro ($10.22 billion) sale of its highway business to Citigroup (C.N: Quote, Profile, Research, Stock Buzz) on Monday will reduce the Spanish builder’s massive debt pile and ease mounting pressure to sell its stake in Repsol.

Last week, Sacyr was close to striking a deal with Russia’s LUKOIL (LKOH.MM: Quote, Profile, Research, Stock Buzz) over its 20 percent stake in Repsol (REP.MC: Quote, Profile, Research, Stock Buzz), one of several assets it had put up for sale to help reduce its debt level during a slump in the housing market. [nLL391747]

Sacyr will book 2.874 billion euros from the sale of Itinere and pass 5.013 billion of debt onto Citigroup, cutting the constructor’s total debt by over a third to 12.5 billion euros from Jan 1.

Sacyr’s share price has lost over 69 percent of its value since the start of the year, compared to a 39-percent drop in Spain’s blue-chip index, as dealers shied away from constructors considered especially vulnerable to the downturn.

Shares in Sacyr were 3.31 percent higher on Monday while Itinere traded 12.5 percent higher, outperforming a 2.8 percent fall on Spain’s blue chip IBEX-35 index .IBEX, after both stocks were suspended on Monday before the market opened.

While Sacyr directors said at a news conference on Monday that it will continue to negotiate the sale of its Repsol stake, analysts said the Itinere deal has brought Sacyr a window of time with its creditors.

“With this operation Sacyr reduces gearing, but most importantly it would solve its refinancing needs for the next 15 months,” Merrill Lynch analysts said in a note.

They added, however, that additional liquidity requirements would derive from the Repsol stake if the share price went below 12 euros per share.

A senior London-based banker said: “Sacyr has been pushed by the government to strike a deal with Citigroup over Itinere to give some relief over pressure to sell Repsol.

“The Repsol deal will probably not happen now.”

DEFENSIVE ASSET

Itinere — which operates highway concessions in Brazil, Chile, Spain and Portugal — was considered a defensive asset for Sacyr as Spanish constructors were hit hard by the dual blow of the global credit crunch and a sudden slump in the domestic real estate market.

Sacyr’s agreed price for Itinere of 2.9 billion euros plus 5 billion euros in debt is at a considerable discount to estimates at the beginning of November when analysts said the highway unit would fetch around 3.9 billion euros plus debt.

“(Citi) is buying portfolio and know how and at a good price, putting them in a good position to take part in future infrastructure opportunities, particularly in the United States,” Head of Spain Private Equity Association Ascri, Jaime Hernandez Soto said.

“There probably hasn’t been anything like Itinere in the market for the last 10-15 years and it will probably take another 10-15 years for an opportunity to buy a similar company (to come up),” a source close to Itinere’s buyer said.

Citigroup has reached a separate agreement with Spanish concessions group Abertis (ABE.MC: Quote, Profile, Research, Stock Buzz) and Italy’s Atlantia (ATL.MI: Quote, Profile, Research, Stock Buzz) to sell certain highway concessions in Spain, Portugal, Brazil and Chile.

Abertis said it will acquire assets in Spain and Chile from Citi for 621 million euros, while Atlantia said it will pay 420 million for stakes in Brazilian and Chilean motorway concessions.

By Paul Day and Tracy Rucinski
Additional reporting by Andres Gonzalez, Judith MacInnes and Olesya Dmitracova; Editing by Simon Jessop