Ansaldo Energia RCF offered in the mid 20s as timeline to strike A&E agreement tightens, Turkey guarantees weigh on liquidity

A chunk of Ansaldo Energia’s RCF was offered in the mid-20s last week but failed to receive any bids, said two sources familiar with the matter. Quotes for the Italian energy group's debt continue falling as the timeline for the company and its lenders to strike an A&E agreement is becoming more stringent, added the sources.

The company recently tabled  an amend-and-extend proposal for the bank debt and is aiming to close a deal as soon as possible. An agreement with the banks is a prerequisite for a capital increase, proceeds of which would partly go to repay the group’s EUR 260m 2.875% bond due on 28 April this year.

“They have weeks to go and not only will they have to finalise the numbers and the terms for an agreement, but they will also have to implement it before 28 April,” said the first source familiar.

The current situation in Italy, which was put under lockdown last week until at least 3 April to try stem the spread of the coronavirus outbreak, is not helping, added the first and a third source familiar.

“With everything that's going on, markets have been repricing it quite dramatically,” said the third source familiar.

Ansaldo Energia’s EUR 360m RCF – EUR 285m of which was outstanding as of 31 December 2018 – matures in June 2022. It was provided by a pool of banks including Banca IMI, BNP Paribas, Commerzbank, Credit Agricole, HSBC, Santander, UniCredit and Standard Chartered.

The gap between potential offers and bids for Ansaldo’s RCF has been narrowing over the past couple of months, with quotes reaching the 50s/60s region at the end of January and a 30/40 context in February as lenders and creditors became increasingly concerned over the group’s chunky new money need. Two non-Italian lenders have been close to selling out of their positions in the revolver, as reported.

Besides repaying the bond, some of the new money for Ansaldo would also go to boost cash on the balance sheet, as the company has been burning cash recently, as earlier reported.

On the top of new money, Ansaldo is also negotiating guarantee lines with its creditors, said the first and a fourth source familiar.

“Bonding lines are a central theme,” said a fourth source familiar. “The issue will be to find an agreement on how to split the bonding lines provision.”

Ansaldo’s majority shareholder (59.9%) is state-backed Cassa Depositi e Prestiti (CdP), while Shanghai Electric owns the remainder of the equity. CdP would likely take the lion’s share of the capital increase.

Further worries for Ansaldo might come from Turkey, said the first and a fifth source.

Its Turkish joint venture Yeni Elektrik (of which Ansaldo holds 40%) was reportedly ordered in late February by a local court to stop its operations. The move came in the wake of the company failing to arrive at a deal with financial institutions regarding the restructuring of USD 560m of debt.

“Ansaldo had cash leakage of EUR 49.3m in 2018 alone related to this project,” commented the fifth source. “It will become a liability which is not small and almost offset the PSM disposal proceeds they expect by year end.”

Ansaldo had set aside a provision to cover the probable risk that banks, in view of the continuing indebtedness of Yeni Elektrik, will call in the guarantees provided by the group in their favour, according to the company’s 2018 balance sheets. As of 31 December 2018, the allocation to this provision impacted the company’s income statement by EUR 121.9m.

As much as USD 33m has already been called by the Turkish banks and paid by Ansaldo from the provision in April 2019, as the half-yearly interest due on 31 December 2018 on the Yeni Elektrik loans was not paid.

“Now Yeni Elektrik operations have been halted after failing to restructure… so this is an NPL for the Turkish banks – they should be calling on those [remaining] guarantees,” commented the first source familiar.

Ansaldo’s total debt structure as of 31 December 2018 included EUR 618.4m of bonds, EUR 532.1m bank loans and borrowings and EUR 10m of other loans and borrowings.

In addition to the RCF and the 2020 bonds, the company also has a EUR 50m loan maturing in August 2022 and a EUR 80m loan due in January 2024 from the European Investment Bank (EIB). The rest of the borrowings comprise a EUR 26.1m facility backed by SACE, a EUR 60m loan with UBI, an AED 14m loan signed with Intesa San Paolo to conduct business in Abu Dhabi and a EUR 6.7m loan with Mediocredito Italiano.

Ansaldo is working with Vitale, Chiomenti and Studio Legale Andrea Zoppini. CdP is working with Rothschild, as earlier reported. RCF lenders in the negotiations are advised by PJT and Clifford Chance.

Ansaldo did not respond to a request for comment.

by Giulia Morpurgo and Chiara Elisei

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