LONDON, May 14 (IFR) - Isolux Corsan’s bonds plunged on Thursday after an article alleged it is renegotiating debt at its solar division, although prices have started to recover after the Spanish firm said the piece contained “various errors”.
The price action comes in a market jittery about idiosyncratic risks at Spanish concession firms after high profile stories knocked peers such as Abengoa and OHL.
Spanish online newspaper El Confidencial published a story on Thursday morning stating that Isolux has hired Rothschild to renegotiate T-Solar’s 1bn-plus debt pile, stating that some of the loans cannot cope with Spain’s new electricity regulations.
This was enough to send Isolux’s 850m 6.625% 2021 notes tumbling more than three points from 84.5 to 81, according to Tradeweb prices.
“Isolux had investor meetings earlier this week and no one asked any questions about T-Solar,” said one investor. “Some people are already saying the story is nonsense, but you’ve seen a big fall as it’s caught people off guard and there’s such an intolerance for risk in this sector.”
Shortly before 1130 BST, Isolux put out a statement explaining that T-Solar is in the process of refinancing its project finance facilities, but that this is “standard practice in the industry” after changes to Spain’s renewable energy regime.
The Spanish government poured subsidies into the solar energy market ahead of the financial crisis, but has cut back tariff levels in recent years in an effort to curb spending.
The statement also stresses that there are “no guarantees to project finance” by Isolux Corsan, and that these loans are backed only by the solar plants themselves.
The guarantee issue is important to bond investors, after Abengoa’s decision to reclassify a bond as non-recourse debt in November last year triggered concerns around accounting practices in the industry.
Following the statement, Isolux bonds have clawed back around half of their losses to a cash price of 82.5.
Isolux’s bonds have been under pressure this year after it shelved IPO plans in January. Standard & Poor’s placed its single B rating on CreditWatch Negative in March on concerns around “very limited headroom” under its financial covenants.
“Management were talking a good story earlier this week and the covenant issue seems to be nearly over,” said the investor. “It sounds like they’ve managed to get some sort of waiver or reset covenants, which they’re very close to agreeing with their bank group.” (Reporting by Robert Smith)