Development bank in €140 million Efacec credit line

 In Companies, Mergers and Acquisitions, News

Portugal’s public development bank, Banco de Fomento, could provide a €140 million credit line to help fill a €230 million black hole in the accounts of Portuguese nationalised electrical and transport systems company Efacec.

The proposal comes after the Government had planned to sell Efacec to DST in 2021, but the only company in the race says it will not buy the Efacec unless its debt liabilities are reduced to €90 million.
It is one of the conditions that DST will insist upon, and in practice means the Government should write-off €140 million of debt, despite Efacec having a string off international orders which it may have trouble meeting because the company had been suffering cash flow problems in 2020 and 2021.
DST is a Portuguese group led by entrepreneur José Teixeira whose activities include engineering, construction, infrastructure for renewables and batteries, among man others.
The reprivatisation of Efacec was slated for 2021, but the Government did not succeed in making a deal with potential buyer which saw the company’s debts as a liability.
The Portuguese Minister of Finance, João Leão, said last week at a Council of Ministers briefing “At the moment, negotiations (for the sale) are still ongoing and a date for its conclusion has not been set”.
The offer on the table now, however, is that the State’s development bank, Banco de Fomento would provide a refinancing line with €140 million under conditions which would in effect mean cleaning the slate on a large part of Efacec’s debt.
So far, DST says that in order to purchase Efacec, it will require certain demands to be met before it capitalises the company with €80 million. The State should underwrite at least €171 million to guarantee various past risks; and recapitalise Efacec by €62.5 million, as well as ensuring that the company’s debts are reduced to €90 million before the deal is signed. These amounts include a recent €45 million loan underwritten by the State.
Another condition of the sale going through is the State would have to take on a commitment to pay up to €8.2 million in the cost of restructuring Efacec, an amount which the Government says exceeds the sum that is, in its opinion, necessary.