Problems are piling up for ACS president Florentino Pérez. First Minister of Industry José Manuel Soria announced a halt to the Castor gas storage project, and now Iberdrola's stock price has fallen sharply because of regulatory changes looming over the power sector.
Measures adopted by the government (strong cutbacks to power distribution, for example) and credit reviews conducted by Fitch and Standard & Poor's caused shares to fall 2.63% yesterday. The stock price ended the day at 4.03 euros per share, which means that ACS is close to asking banks for more guarantees, which would take the price to around 4 euros per share.
The provisions ACS needs to come up with would be tied to various companies in which it owns stock. Financing it used to buy shares of Iberdrola and Residencial Montecarmelo (an 8.08% shareholder of Iberdrola) totals to 1.661 billion euros of purchases since December 28, the end of the previous financing term, which extended the term limit by three years to December 28, 2014.
The financing contract outlines the current coverage that backs shares purchased to date and the existence of a coverage ratio on the market value of the company's stock such that if it cannot cover financial obligations, it could be subject to a court seizure.
Additionally, limited resource financing could be sourced through Corporate Funding. The term would expire in June 2014; it has increased since December 2010 by 300 million euros, reaching a nominal value of 900 million euros in total with financing rates tied to the euribor and with guarantees to back the acquired shares. The main characteristic of this contract: a coverage ratio on the value of Iberdrola shares that forces the company to front fonts upward of 450 million euros.
On June 14, 2011, ACS also extended the term on its 2.432 billion euro swap for Iberdrola shares, which lasts until March 2015. The guarantee on this loan is a 4.73% stake in Iberdrola, and it could turn into an interest rate that tracks the euribor. Similar to the loans mentioned above, ACS ought to be able to cover said holdings. The debt associated with Iberdrola (more than 4.962 billion euros) is worth more than 18.5% of ACS's capital at this time. At the close of yesterday's session, this number was 4.454 billion euros.
