Kohlberg Kravis Roberts (KKR), owners of Grupo Gallardo Balboa (Gallardo), have accepted Extramduran-based Grupo Industrial Cristian Lay’s (Cristian Lay) offer to buy the steelmaker after a board meeting held on July 10.
According to local media reports, while Metalúrgica Galaica SA (Megasa) tabled a last-minute counter-offer last week, the Gallardo and KKR board informed shareholders, they had selected the bid with the “fastest option to implement and with the lowest risk of execution.”
Cristian Lay’s proposal was selected with the backing of most financial creditors, Gallardo’s works council, suppliers, and customers, and includes the restructuring of the company’s financial liabilities, reducing them by €440mn.
The agreement states Cristian Lay will assume 100pc of the company’s outstanding debt, which includes working capital lines, and other instruments totaling around €145mn, and guarantees employment for its 900 employees for two years.
In an announcement, Cristian Lay noted it will perform a capital increase of €70mn and will make an immediate injection of €30mn to guarantee the purchase of raw materials and keep the production of all Gallardo centers active.
Miguel Loyal Angel, chief executive officer of Cristian Lay’s industrial division commented, the company was convinced that the Spanish region needed a strong commitment towards the reindustrialization of the country to reduce its dependence on the Asian markets.
After failing to secure state loans, KKR entered Gallardo into “pre-bankruptcy” in late June, a legal tool that provides a four-month period to reach an agreement to refinance its €150mn in debt; potentially guaranteeing its future commercial viability.
KKR acquired control of Gallardo in November 2019, when it made a debt-for-equity swap due to the company’s inability to comply with the required financial ratios derived from its refinancing agreement in 2014.
Gallardo operates eight steelmaking facilities across Spain including electric arc furnaces and re-rolling mills, which can produce rebar, corrugated steel bars, electro-welded meshed drawn wires, galvanized sheet, structural sections, and some tubular goods.
Cristian Lay employs 1,600 workers in 12 countries, distributed across sectors such as the promotion and construction of renewable energy plants, gas distribution, chemical production, paper production, and jewelry smelting and distribution.