Ailing Ercros wins reprieve as board steps back from court protection: Spain and the KIO have narrowly avoided confrontation. Gail Counsell reports

ERCROS, Spain's biggest chemical company, last night won a temporary reprieve when an emergency board meeting of the debt- laden company decided against seeking court protection from its creditors.

Instead Ercros is to try to renegotiate its loans with its bankers and to press on with attempting to obtain fresh capital from new shareholders.

The decision means the Kuwait Investment Office, which controls 40 per cent of the company through its Spanish holding group Torras, has pulled back from a major confrontation with the Spanish government.

But it is still likely to provoke controversy. A survival plan drawn up by the Ercros board involves the loss, at least temporarily, of around 3,000 of its 11,000 workforce.

Ercros has bank debts of more than pounds 500m, more than half of it short term, and its need for fresh capital is acute.

But the KIO, which handles the investment of the oil state's revenues, is under pressure to feed Kuwait's post-Gulf war needs for capital for reconstruction, and has proved less than keen to pump more money into Spain, especially into the ailing chemical sector.

So the Kuwaitis have been refusing to back a vital capital injection for Ercros unless the Spanish government also puts more cash into the debt-laden group - something that would almost certainly see it fall foul of EC anti- subsidy rules.

The two sides have engaged in brinkmanship - Ercros's board, in emergency session on Monday, dramatically suspended its meeting to have crisis talks yesterday morning with Claudio Aranzadi, the Spanish industry minister, in a last-ditch effort to change the government's mind.

That seemed to have failed when Mr Aranzadi emerged to insist that the Spanish government would not volunteer new funds. It looked increasingly likely that the board would have no choice but to decide to seek to suspend payments to its creditors.

But after the reconvened board meeting finished, Josep Pique, Ercros's acting chairman, made it clear there would be no suspension of payments and seemed hopeful that the estimated Ptas25bn ( pounds 140m) needed by the group to meet its short-term commitments could be found.

A spokesman for Torras made it clear that the intention was, if possible, for shareholders to make loans rather than inject fresh capital into the company.

Nevertheless, the Kuwaitis do appear to be pulling back on their original insistence that no fresh money would be forthcoming without an equivalent government commitment.

Hopes partly hinge on Freeport McMoRan, the New Orleans- based commodities group. The two already have a deal on the table under which the American company would buy a majority stake in Fesa-Enfersa, Ercros's fertiliser subsidiary, which is responsible for more than half of its consolidated debt and the bulk of its losses. But the agreement has been stymied by the KIO's refusal to give Freeport guarantees covering future losses at the subsidiary.

Renegotiation of Fesa's debt, possibly with the aid of Banco Exterior, the state-owned banking group, could be the key to breaking the impasse between the Kuwaitis and the government.

The outlook for Ercros's fortunes took a turn for the worse following the resignation less than a month ago of Javier de la Rosa, as the Kuwaiti's chief adviser and financial partner in Spain. The KIO was swift to reassure the Spanish government of its continuing commitment to its industrial interests.

But the belief that Mr de la Rosa's departure, after 10 years as the KIO's adviser, signalled a more cautious investment stance gained credence when the Kuwaitis made it clear that fresh money for Ercros was conditional on a government contribution.

Nevertheless, the political fall- out from what would be one of Spain's largest corporate failures is clearly an uncomfortable prospect for the low-profile KIO as much as it is for the Spanish government, a factor that probably underlies last night's decision.

Start your day with The Independent, sign up for daily news emails
News
Lois Pryce... Life Without a Postcode. Lois lives on a boat with her husband.. Registering to vote in the election has prooved to be very difficult without a fixed residential post code. (David Sandison)
newsHow living on a houseboat meant I didn't officially 'exist'
Arts and Entertainment
Cassetteboy's latest video is called Emperor's New Clothes rap
videoThe political parody genius duo strike again with new video
Sport
Steven Fletcher scores the second goal for Scotland
cricketBut they have to bounce back to beat Gibraltar in Euro 2016 qualifier
News
news
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Retirement Coordinator - Financial Services

Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

Recruitment Genius: Annuities / Pensions Administrator

Negotiable: Recruitment Genius: You will be the first point of contact for all...

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Ashdown Group: Learning and Development Programme Manager

£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

Day In a Page

Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor
How to make your own Easter egg: Willie Harcourt-Cooze shares his chocolate recipes

How to make your own Easter egg

Willie Harcourt-Cooze talks about his love affair with 'cacao' - and creates an Easter egg especially for The Independent on Sunday
Bill Granger recipes: Our chef declares barbecue season open with his twist on a tradtional Easter Sunday lamb lunch

Bill Granger's twist on Easter Sunday lunch

Next weekend, our chef plans to return to his Aussie roots by firing up the barbecue
Joe Marler: 'It's the way I think the game should be played'

Joe Marler: 'It's the way I think the game should be played'

The England prop relives the highs and lows of last Saturday's remarkable afternoon of Six Nations rugby
Cricket World Cup 2015: Has the success of the tournament spelt the end for Test matches?

Cricket World Cup 2015

Has the success of the tournament spelt the end for Test matches?
The Last Word: Justin Gatlin knows the price of everything, the value of nothing

Michael Calvin's Last Word

Justin Gatlin knows the price of everything, the value of nothing