This morning, FCC informed the Spanish National Securities Commission (CNMV) of the terms of the refinancing agreement, which covers the bulk of its bank debt, amounting to 4.512 billion euro. This agreement provides financial stability to FCC, the Citizen Services Group, over the next four years and will facilitate achievement of the objectives set out in the Strategic Plan.

At a meeting yesterday afternoon, CEO Juan Béjar informed FCC's Board of Directors of the final conditions of the refinancing agreement with the creditor banks. In this context, the Group's Board emphasised "the decisive role played by Esther Koplowitz, the controlling shareholder, as a component of the Group's identity, of its development and of its corporate interests".

Practically all of the lending banks, representing 99.98% of the related liabilities, participated in the refinancing agreement, which involved replacing several loan agreements with a new long-term syndicated loan aligned with the goals of the Group's Strategic Plan.

The new funding comprises two tranches: 3.162 billion euro and 1.350 billion euro. The second tranche (Tranche B) includes a right to convert the outstanding balance at maturity (with a PIK component, i.e. capitalizing accrued interest) into newly-issued shares at market price, without a discount, by offsetting the account payable with equity, based on the issuance of warrants.

This new financing agreement matures in 4 years and may be extended up to at most 6 years in the event of conversion of Tranche B into FCC shares. The completion date is the date on which certain conditions precedent are met, which include notably the novation of the 5-year 450 million euro convertible bond issued by FCC in October 2009.

his agreement represents a milestone in the current Strategic Plan. The agreement reaffirms the following management principles:

a) Strengthening the Group's viability in accordance with the business plan and the sustainability of its total debt by appropriately adapting the repayment schedule to cash flow.

b) Rationalisation of the financial and operating structure of the refinancing scope, i.e. the companies to be included in the contract as obligors and guarantors, by legally and effectively ring-fencing the business areas outside of that scope.

c) The gradual reduction of debt by fulfilling, among others, the divestment plan and the operational restructuring and cost-cutting plan.

d) Allowing for capital expenditure in strategic areas so as to enable FCC to maintain its competitive position in bidding for new contracts, especially in Water and Environment.

An additional possibility is the early repayment of Tranche B at a discount on its nominal value, with the consequent proportional reduction of financing costs and leverage, and deactivation of warrants. The overall agreement will notably enhance the ability to generate value for FCC shareholders.

Convertible bonds and Cementos Portland

The bank debt refinancing agreement includes restructuring of FCC's 450 million euro convertible bond issued in October 2009. The restructuring may be consensual, through approval by the General Assembly of Bondholders of an amendment to the convertible bonds' terms and conditions, mainly to extend the maturity, reduce the conversion price from 37.85 euro to 30 euro, and maintain the yield.

If approved by the General Assembly, the amendment of the terms and conditions will not be enforceable until approved by FCC's Shareholders' Meeting and until completion of the refinancing transaction.

Alternatively, if the General Assembly does not approve the amendments, FCC will apply to the courts for approval in accordance with Additional Provision Four of the Insolvency Act. To that end, the process has commenced to obtain consent on behalf of non-participating bondholders and to appoint an independent expert to validate that the FCC Group's actions as a whole are viable and reasonable.

An agreement has also been reached with Cementos Portland Valderrivas's creditor banks to defer FCC's 200 million euro contingent capital contribution to that subsidiary. The agreement has a term of 4 years, as from the time that FCC's obligation to make the contribution arises and it will bear the same interest rate as applied to Tranche A of the financing agreement.