Abengoa Bioenergy US Holding LLC, a unit of Spanish conglomerate Abengoa SA (ABG.MC), received interim financing to pay wages and keep the lights on while it tries to reorganize under Chapter 11, according to a court ruling on Wednesday.
Abengoa Bioenergy filed for bankruptcy protection last week. Lawyers on Wednesday said it is a guarantor on more than $6 billion in liabilities linked to its Spanish parent’s debt structure, which tops $20 billion. Abengoa, a global engineering and clean energy company, is in the midst of a debt restructuring.
U.S. Bankruptcy Judge Kathy Surratt-States approved the debtor-in-possession or DIP loan on an interim basis over objections from grain suppliers who are owed money by Abengoa Bioenergy and said they feared the cash would end up in Spain.
The judge’s ruling cleared the way for Abengoa Bioenergy to borrow $7 million now and could return to court later to seek additional financing.
Grain suppliers Gavilon Grain LLC, the Farmers Cooperative Association, The Andersons Inc and Central Valley Ag have cited concerns in court documents that the U.S. business was transferring cash and loan proceeds to Abengoa SA.
DLA Piper attorney Richard Chesley, who represents Abengoa Bioenergy, tried to assuage their concerns.
“We’re closing Spanish bank accounts. The cash is very controlled,” Chesley said, adding that the DIP lender also wants to know where the cash was going.
A final hearing on the DIP will be held on March 29.
Meanwhile, Seville-based Abengoa SA is racing to reach an agreement with its banks and bondholders by March 28, when it would risk a full-blown insolvency process and become Spain’s largest corporate failure.
“Those negotiations are continuing around the clock,” Chesley said.
Abengoa appointed a former partner at KPMG, Antonio Fornieles, as new chairman on Tuesday to try to facilitate a debt restructuring.
Parallel to Abengoa Bioenergy’s bankruptcy process, investment banker Lazard has been developing a sale process for some of the U.S. bioenergy assets, according to court documents.