Brussels endorses the rescue of Celsa and leaves it at the expense of the agreement with the creditors | Economy

The Celsa Group steel industry already has all the necessary administrative support to receive the 550 million euros it requires so that its finances can return to a point of equilibrium. The European Commission has given its approval this Friday, so the Council of Ministers will be able to approve the rescue on Monday, in an advanced meeting due to the NATO Summit in Madrid. Although for this aid to materialize, what seems most difficult still remains, an agreement between the company and the eight opportunistic funds that control 2,290 million of its debt (out of a total of 2,800 million) on the way in which 1,200 million will be reduced. euros of liabilities. That is the condition that the Spanish Society of Industrial Participations (SEPI) has imposed to meet the request of the metallurgical company of the Rubiralta family.

The passage through Brussels was essential for the largest rescue planned by SEPI for companies considered strategic and affected by covid to become a reality. The reason is that one of the two loans through which these public resources will be injected is a participatory loan that exceeds the threshold of 250 million, specifically 280.5 million euros. The other loan will be articulated through an ordinary credit of 270 million.

The aid, which Celsa had been behind for almost two years, is processed through the Solvency Fund for Strategic Companies, the same through which SEPI has helped 24 companies with more than 2,000 million euros. The drop in billing suffered by the company (the Spanish parent company went from billing 1,049 million to only 811 between 2019 and 2020) prevented it from assuming the payment of the debt and interest as of March 2020. One of the added problems is that the next year it had to assume the payment of 1,200 million euros of a convertible credit.

Celsa reaches this moment at the last breath, just before the European Union closes the window of opportunity on State aid for companies impacted by the pandemic. SEPI, however, will maintain tight control over Celsa’s activity, over which it will have veto power over some company decisions in the next seven years, the time scheduled for the aid to be returned. A member of SEPI will sit on its board of directors as an observer.

The 550 million euros that the company will receive will go, basically, to the eight funds that control that unpaid debt. But the Government will not transfer them if Celsa and those entities (Deutsche Bank, Goldman Sachs, Golden Tree, Trinity, Cross Ocean, SVP, Sculptor and Anchorage) do not reach an agreement on the scheme to reduce the 1,200 million debt, as as required by SEPI. The negotiations between the two parties are complex and seem entrenched, with a great distance between the two parties. The only point on which they have agreed is the one that refers to the state company’s request to partially clear the liabilities from the balance sheet.

Celsa Group initially demanded a reduction of 1,100 million from the funds in exchange for injecting 50 million directly, considering that taking into account the discounts with which they acquired the debt, they would also ensure the investment. The opposition of the funds was total and as a counterproposal they offered to exchange 500 million of their debt for 49% of the group’s shares. He argued that the owners also have to assume part of the effort in the operation that has to ensure the future of the Spanish steel giant, which financed part of its expansion with the loans that are now part of the portfolio of opportunistic funds, after banks sold them. The Rubiralta family has flatly rejected the loss of part of the capital of the Catalan group.

Slow in the negotiation

Although it seemed that both parties had to face a negotiation against the clock for SEPI to offer them the two credits, the administrations have ended up being more agile than the interested parties themselves. The credits are about to be granted, but first the Government will have to receive the contract by which both parties agree on how they will resolve the credit reduction.

The President of the Government, Pedro Sánchez, has even contacted the CEO of Deutsche Bank, Christian Sewing, to facilitate the agreement. And Celsa has achieved the support of regional governments, employers and unions in the negotiation of the funds, without these having yet had an effect.

Celsa’s auditor, EY, maintained in the audit report of the 2020 accounts that the dependence on negotiations with SEPI to benefit from the 500 million credit represented “a material uncertainty that could significantly condition the Company’s ability to be able to continue to operate under the going concern principle. According to those accounts, the group lost 22 million two years ago, compared to profits of 28 million a year earlier.