Duro Felguera requires an urgent liquidity injection to avoid a pre-bankruptcy situation

Duro Felguera team – without a CEO for two weeks – He is constantly looking for a solution to avoid pre-bankruptcy creditors, which the market takes for granted. The situation is difficult as cash has been depleted and there is limited room for maneuver to continue operations in the coming months. As the GOAL was able to confirm, there are several options, which include an injection of capital from the new owners of the company, the Mexicans Prodi and Mota-Engil, a loan guaranteed by the state, or a contribution from the ministry. finance, through the State Society for Industrial Participation (SEPI).

Duro Felguera became the second company to be rescued by the SEPI fund activated during the pandemic, after Air Europa. resulting in 120 million in government resources that should start returning in 2025. It was cash generation problems that prevented it from paying the first depreciation in 2024, and the state agreed to defer payments. So you will have to make a first payment of five million in 2025, 30 million in 2026, 36 million in 2027 and 49 million in 2028. Today no one believes that they can cope with such a schedule.

Therefore, amid rumors of a pre-bankruptcy request, the National Securities Market Commission (CNMV) has decided to temporarily suspend, with immediate effect at mid-morning this Monday. trading on the stock market of the Asturian engineering company Duro Felguera, at the same time, relevant information about the society is disseminated.

Pre-bankruptcy risk

The CNMV made this decision after Duro Felguera reported (fifteen days late and after the stock market’s big rally last week) that the Algerian company Sonelgaz filed a petition for arbitration with the Algerian Chamber of Commerce and Industry against the Asturian engineering company, demanding the suspension of the contract with the company Djelfa in Algeria. A lawsuit seeking 413 million euros. The Spanish company has announced it will appeal and while it is expected to take the impact into account, the refusal will not have an immediate impact on its accounts.

This is why the market is suggesting that Duro Felguera’s removal is because of the real risk that they might file for bankruptcy. Under the most recently approved rules, this pre-bankruptcy period is a three-month period during which a company declaring it will stop paying while awaiting liquidity or a reorganization of its debts and obligations. If financial problems cannot be resolved within this period, bankruptcy is declared.

In the case of Duro Felguera, this newspaper already reported two weeks ago about the critical situation in the company. The company absorbed 69% of government aid before the end of the first year of the concession, paying only operating expenses and without any investment in related projects. And of the 90 million that Prodi and Mota invested last year, less than half remains, absorbing cash and provisions for operating expenses. At the end of 2021, it earned 22.6 million due to support from the rescue, but in 2022 it reduced it to 5.4 million, and in 2023 it recorded losses of 21.9 million.as they rose to 26 million in the first six months of this year.

Duro Felger Arbitration

At the end of 2022, after receiving the full amount from SEPI, the company barely had 24 million in cash “and other liquid assets”, a figure that rose to 109 million in 2023 after Prodi’s injections, but fell again to 45 million. at the end of June. At this rate, it’s likely that there will be less than five million in cash remaining, which is a worrying situation for a company the size of Duro Felguera.. To make this scenario even worse, at the end of 2023, it spent 70 of the 80 million guarantees guaranteed by Cesce, which were received as part of the government loan.

Duro Felguera only has 50 million euros in reserves, which is not enough to pay for the lawsuit it is involved in. The Jebel Ali Power Plant (Abu Dhabi) project alone attracted 47 million investments.but he also has litigation in Costa Rica (Recope) for 87 million and another 40 million for the Aconcagua (Chile) project. In this context, the arbitration proposed by Algeria could add 413 million to these hidden liabilities.

Cesce or ICO

In this context Duro Felguera has all options open, and the first of them is an injection on the part of its owners.. However, Prodi is finding it difficult to guarantee new resources after investing 90 million just a year ago. The SEPI option is also unclear, since it would mean entering into the capital of the rescued company, in which they could participate already in the future, if the Asturian company does not repay the outstanding loans from the pandemic in the form of an equity loan.

In this case, the most reasonable is a loan pool a bank that can inject the necessary money, although always with the approval of the state, through the Official Credit Institute (ICO) or Cesce. In the case of the ICO, to obtain liquidity, and in the case of Cesce, to obtain guarantees that will allow it to continue hiring employees. The company has been working on solutions since the departure of previous CEO Jaime Arguelles, although the current situation is complex and does not require too much optimism.