14 August 2015 by pdonnat
ABGSM ( Abengoa SA) is one of the top European credit story of the summer. This company is specialized in green energies but has a complex, we could say abstruse, leveraged corporate structure coupled with weak earnings. To survive, they have no choice than raising equity and selling assets. Today they announced that they intend to do both. The share price is closing 10% down. The move is credit friendly. In the last two sessions, the cost to insure ABGSM debt decreased from 70% upfront + 5% per year to 60% upfront + 5% per year (the Grapple displays the equivalent running cost, currently around 45% per year) .
The CDS is very active. The market has traded 100MUSD per day in average the first week of august. DTCC will publish next Wednesday the volumes for the current week. Some hedge fund initiated short positions on the equity but the CDS market is offering tenfold much more liquidity than the equity market.