Spain's Abengoa starts pre-insolvency proceedings

Spanish company Abengoa announced on Wednesday it would start pre-insolvency proceedings after a potential investor cancelled its investment.

Gonvarri Corporacion Financiera had signed an agreement with Abengoa to inject 350 million euros (371 million U.S. dollars) into the company, but it considered that some conditions of the agreement were not fulfilled and decided not to invest the money.

Local media reported that Gonvarri had asked that the banks invest 1.5 billion euros into the company as a condition to inject those 350 million euros, but it was not possible.

Abengoa was suspended from trading on Wednesday morning for some hours and it will be removed from the stock index as of Nov. 27. Abengoa shares fell 53.85 percent on Wednesday.

According to the Spanish law, after starting pre-insolvency proceedings, Abengoa has up to four months to negotiate with the banks a debt restructuring in order to avoid filing for insolvency.

"The company will continue the process of negotiation with its creditors with the aim of reaching an accord that guarantees its financial viability", Abengoa said.

According to the Financial Times, however, Abengoa will have some difficulties to achieve an agreement with the banks. "It looks like nobody is willing to put money into this company, especially once they have looked at the books in detail," the Financial Times reported citing a banker.

Abengoa's debt reached in September 8.903 billion euros and plus the billions of euros that the company owes to providers would lead to Spain's largest bankruptcy on record.

The company was born in 1941, it employs 24,306 people worldwide and works in more than 80 countries. (1 euro = 1.06 U.S. dollars)