The funds ask Celsa and SEPI for a new rescue plan that involves their entry into the capital

Houlihan Lokey, representative of 85% of Celsa's debt that is in the hands of the funds, sent a letter last Sunday to the Catalan company and SEPI to respond to the group's capitalization proposal, which aims to achieve 550 million in loans from the Solvency Support Fund for Strategic Companies.

Thomas Osborne
Thomas Osborne
30 May 2022 Monday 16:23
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The funds ask Celsa and SEPI for a new rescue plan that involves their entry into the capital

Houlihan Lokey, representative of 85% of Celsa's debt that is in the hands of the funds, sent a letter last Sunday to the Catalan company and SEPI to respond to the group's capitalization proposal, which aims to achieve 550 million in loans from the Solvency Support Fund for Strategic Companies. The rescue operation requires the agreement of all the parties -company, creditors and SEPI- to go ahead and must be closed within a month, since on June 30 the exception period of the European Commission to allow certain State aid ends contrary to competition.

In their letter, the funds explain that they regret not having been part of the negotiations between Celsa and SEPI or having been informed of them for a year and recall that any agreement that affects the capital structure requires their approval. They also criticize that Celsa has informed them that the SEPI proposal is not negotiable and they assure that the company threatens to take any action – which they interpret as going to bankruptcy proceedings – if they do not agree to accept the agreement in the known terms.

In addition, they say that the proposal implies a reduction of their debt of 1,200 million, losing their guarantees for the remaining debt and worsening the conditions of their credits, something that they are not willing to consent to. Above all because, according to his analysis, the Rubiralta family would maintain 100% of the group and would contribute only 50 million euros in a capital increase.

For the funds, the main problem is that their right to convert debt into capital, recognized in the financing contract signed by the company with the banks, is ignored and that they were subrogated when they acquired the debt with an average discount of 80%. Now, the debt in his favor rises to about 1,500 million, but the company would barely recognize 300 million. The funds insist in the letter that the effort of the shareholders in this restructuring is insufficient compared to what is being asked of them.

Finally, they launch the accusation that the directors and managers of Celsa do not differentiate the interests of the company - to which they owe themselves above whoever hired or appointed them - from those of the sole shareholder, the family of Francesc Rubiralta, the President. Houlihan Lokey announces in the letter to Celsa and SEPI that he will make an alternative proposal in the coming days, satisfactory to all, reducing the debt and avoiding bankruptcy.

Celsa's response was immediate. Company sources said yesterday that the current proposal involving the injection of SEPI is already good for all those who are part of Celsa, including financial creditors. The company does not recognize at all that the funds have the right to demand the nominal value of the debt they bought from the banks, but only the proportional part of the investment made at the time. This represents a reduction of 80% of the amount recognized by the company itself in its audited consolidated accounts. Despite appearing in its accounts, the company explains that the reality is different and that it has been trying for some time to have it recognized.

As the funds do not admit it, this discussion about the legitimacy of the debt as a whole led Celsa to file a lawsuit in the court of first instance 11 of Madrid two years ago. The lawsuit was admitted for processing, answered by the opposing party and waiting for the judge to set the preliminary hearing. The company requests that the 2017 refinancing agreement be annulled, judicially approved by a commercial court in Barcelona, ​​when it separated its debt between sustainable and non-sustainable and structured it through a syndicated loan and a convertible debt. Celsa reordered its liabilities, but what it did not count on is that shortly after the banks sold it to the funds after the ECB demanded that they strengthen their solvency. In order to undo the assignment of credit, Celsa requests the annulment of the refinancing that made it possible. In any case, this issue is sub iudice and will take years to resolve.

Now, the only thing that counts is what can be resolved before June 30. The positions are antagonistic. The funds ask to enter the capital and a distribution of efforts that is balanced between all parties. Celsa, on the other hand, does not contemplate opening the capital to the funds in any case "because of its speculative and non-industrial nature" and believes that the funds ensure a good return with the agreement for the help of SEPI.