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Energy companies coming to their senses

26 August 2015 by pdonnat

If the trust is broken, if you have too much debt and if you are not a central banker, you just have one solution: raise new equity or at least stop paying your shareholders. When your financial situation deteriorates, you have to protect your creditors first and foremost. ABGSM (Abengoa SA) has successfully mandated 3 banks for its 650MEuros capital increase. They are scoring one point and gaining some confidence back from their investors. The CDS is down 8% to 54% upfront plus 5% running from yesterday close. ISOLUX the companion of misfortune is also tighter by 4.5% to 45.5% + 5% running. The remaining question is the size of the issuance. If we remember what happened to banks during the GFC, the size of any capital increase was always too short.
In the US, we had also a similar news, RIG (Transocean LTD) has suspended its next 2 dividends. The CDS was tighter at the open but widen back during the session. RIG shall likely request more shareholders’ help.