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Update on the insolvency of Spanish highway concessions

Iñigo Rubio Lasarte
It seems that Spain may see a solution in the coming weeks to the nine Spanish highways that filed for insolvency within recent months. The Government is working on a plan to finally rescue the insolvent concessions, with the acceptance of the financial lenders.

According to various government sources, the proposal consists of nationalising the insolvent concessions (AP-41, R-2, R-4, R-3 and R5, AP-36, Aucosta, Ciralsa, M-12 and Ausur) by contributing the equity of the concessions to a public company. After the Government takes control, it will agree on a restructuring of the debt with the financial lenders, including substantial write-offs. The plan will need the support of both the equity sponsors and the financial lenders, and it is here that a substantial discrepancy may appear between the Spanish and foreign lenders.

Once the existing debt (approximately €3.5 billion, or $4.5 billion) is restructured, an additional line of credit for €1.2 billion will be made available by the lenders to cover the payment of the expropriations, which, together with the significant decrease in traffic, have been the main cause of the insolvency of the concessions.

The proposal avoids payment of the administration's pecuniary liability (the RPA, or compensation for early termination of a concession), estimated to be around €3.5 billion. This compensation is pledged under the financing agreements and is considered a key element in the security package, but some of the insolvency trustees have challenged its validity. That challenge (that should probably be objected to by the lenders) has added some uncertainty to the lenders' expectations of recovery, and therefore, the proposed solution might be understood as a good enough opportunity to maximise value for the lenders.

As a result of the above, senior debt of these concessionaires is being traded at a discount, and several distressed funds are showing some appetite to acquire it despite uncertainties over the final recourse against the Spanish state through the pledge over the RPA liability.

Iñigo Rubio Lasarte

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