There's turmoil at one of Spain's biggest companies, Abengoa, after it started insolvency proceedings. As Sonia Legg reports, Spanish bank stocks also fell after a potential investor pulled the plug on a vital injection of cash.
Spain's sunshine city of Seville - the perfect place for the headquarters of an engineering and renewable energy firm. But dark clouds are hanging over Abengoa. Gonvarri, a unit of the industrial group Gestamp, withdrew an investment offer of 350 million euros on Wednesday forcing Abengoa into insolvency proceedings. Its shares tumbled 54 percent and wiped 470 million euros off the value of the company. Some in Spain are now bracing says Simon French from Panmure Gordon. (SOUNDBITE) (English) SIMON FRENCH, CHIEF ECONOMIST, PANMURE GORDON, SAYING: "I think what we are seeing with this company is the potential for that bet on renewables to go sour and you are starting to see the potential for a bankruptcy which could leave an awful lot of Spanish banks exposed." Abengoa has biofuel and solar-heated power plants in the U.S. too. And it employs 24,000 people around the world. It now has four months to reach an agreement with creditors. And many Spanish and international banks will be watching developments closely. Total exposure to Abengoa reportedly stands at more than 20 billion euros. No surprise then that Spanish banking stocks were feeling the impact. (SOUNDBITE) (English) SIMON FRENCH, CHIEF ECONOMIST, PANMURE GORDON, SAYING: "We are fully aware of the bust in real estate in Spain but there is less investor scrutiny thus far on what the resilience of the corporate balance sheet looks like and whether today's crisis is illustrative of a wider malaise." The U.S. Securities and Exchange Commission says Santiago Seage has resigned as Chairman at Abengoa Yield - the firm's U.S operation. The company will also be removed from Spain's blue-chip index Ibex.