|Iñigo de Luisa
As a result of the stable regulatory framework that now
applies to the renewable energy sector and, in particular, the
economic regime applicable to such projects, creditors and
sponsors are able to successfully refinance them.
Creditors have been working with sponsors' chief finance
officers to resize projects to sustainable debt levels and
agree on new base cases.
The restructuring involves amending the terms and conditions
of the existing facilities by sharing efforts between creditors
and sponsors. This could be consensual, requiring unanimous
consent of all creditors, or judicially approved schemes of
arrangement to cram down minority dissenting creditors.
The guidelines that generally apply to these restructurings
are, among others:
(i) amending the repayment schedule to take advantage of the
gap between the final maturity date and the deadline of the new
(ii) decreasing the service debt as a result of the lower
margins the market is currently providing;
(iii) partial conversion of the senior debt into PPL;
(iv) updating the operations and maintenance and other
management and services agreements due to the high competition
and the efficiencies achieved in the energy sector;
(v) introducing new early repayment events including
cash-sweep mechanisms over a large portion of the free cash
(vi) amending the former restrictions on distributions so
that they are allowed for the benefit of sponsors.
One of the creditors' main concerns is the two-year
claw-back risk over these transactions. Parties can mitigate
this risk by:
- granting extensions and lower margins;
- executing a refinancing agreement pursuant to section 71
of the Spanish insolvency law. This will allow them to
benefit from the so-called shield protection against
claw-back actions; or,
- gaining judicial approval of the framework refinancing
agreements to extend their effects to any dissenting entity.
In this case, when there is a dissenting entity in a
refinancing process, additional actions can be implemented,
such as acquiring the dissenting entity's debt.
Traditional banks (both local and international) are also
exiting projects and new investors are taking over through debt
acquisitions. These investors are the catalysts for the
In other cases, the financial restructuring involves issuing
bonds (or even a single bond) to replace the existing debt at a
discount. There is a lot of interest in these restructuring
deals involving renewables in Spain.
Iñigo de Luisa and David Vidal