It looks like Spain’s largest corporate failure may not fail at all if its crony benefactors have anything to do about it. In fact, government talking heads have alluded to the fact that the company is “too innovative to fail.” So innovative, you see, that it can’t survive in the market because it is reliant upon government subsidies where there is no market for its products.
Abengoa was a pet project of the Obama administration so he and his cronies could funnel billions in federal subsidies for government-green projects for favored players in the crony ring. The company received $2.7B from the Obama regime for solar energy projects in Arizona and California, and he personally promoted the company while he proudly threw billions into its strongbox. The Arizona project was rife with impropriety. The Washington Times had reported, in late November 2015:
The renewable energy firm, which is constructing several large-scale solar power projects in the U.S. and has received at least $2.7 billion in federal loan guarantees since 2010, said Wednesday it will begin insolvency proceedings, a technical first step toward a possible bankruptcy.
…A potential Abengoa bankruptcy could be much worse for taxpayers, although it’s unclear how much of the guaranteed loans the company has paid back. Neither the White House nor the Energy Department responded to requests for comment Wednesday seeking information on how much the company still owes on the loans, for which the federal government might be left on the hook.
…“When you have a company that is based on subsidies, it is no surprise they run into financial trouble because their business model isn’t based on economics; it’s based on politics,” said Daniel Simmons, vice president for policy at the conservative Institute for Energy Research, a leading critic of the administration’s spending on renewable fuels and of the president’s energy policy more broadly.
In Spain, a company is given 4 months to reach agreement with its creditors. Last week marked that day when that agreement was due, otherwise the company would have to seek insolvency proceedings. Except that on the day of reckoning last week, Bloomberg reported that ”more than 75 percent of the company’s lenders agreed to continue talks for as much as seven months, Seville-based Abengoa said in a regulatory filing Monday.”
Note what banks are lining up at the trough of credit default swaps. Now what’s really interesting is the cast of characters around the company. Many thanks to Steve for the links to the latest, updated stories on this topic. Follow me on Twitter @karendecoster.