Cox Group Uses 54% Bridge Loan for $4.2 Billion Iberdrola Buy

Cox ABG Group SA took a 54% bridge loan to fund its $4.2 billion acquisition of Iberdrola's former Mexican assets, confirmed by reporting on 25 May 2026. The Spanish utility secured the short-term debt, equivalent to roughly $2.27 billion, with its own shares as collateral. This financing structure accelerates a deal that reshapes the power generation landscape in Mexico at a time of global energy transition.

Context — why this matters now

The finalization of this acquisition follows Iberdrola's strategic sell-off of its Mexican generation portfolio, which was announced in May 2024 and involved assets with a total capacity exceeding 8.5 gigawatts. That initial $4.2 billion divestment, involving a consortium led by Mexico's state-owned power utility, was one of the region's largest energy transactions of the decade. The current macro backdrop features higher-for-longer base rates in Mexico, with the Banxico policy rate holding at 10.5%, which increases the cost of use for corporate acquisitions.

What triggered Cox's immediate financing need was the conclusion of the asset handover from Iberdrola, creating a near-term capital requirement. The company opted for a short-term bridge loan to secure the assets quickly, deferring the execution of longer-term, permanent financing until market conditions potentially improve. This approach allows Cox to capture operational control and cash flows from the acquired power plants immediately, despite the higher interim financing cost.

Data — what the numbers show

The $4.2 billion gross enterprise value of the asset package represents a significant premium to the median valuation for Latin American utility M&A over the past five years, which averaged around 8x EV/EBITDA. Cox's 54% bridge loan component totals approximately $2.27 billion, leaving the remaining 46%, or $1.93 billion, to be funded from other sources like cash reserves or equity. Iberdrola's sold portfolio in Mexico had a combined generation capacity of 8,539 megawatts, a figure that will make Cox a top-five private power producer in the country overnight.

A peer comparison highlights the aggressive use: Enel Americas, a major regional competitor, maintains a net debt to EBITDA ratio near 3.2x. Cox's post-acquisition use, before refinancing the bridge, is projected to exceed 4.5x, placing it at the upper end of the investment-grade utility spectrum. The yield on Mexico's 10-year sovereign bond, a benchmark for corporate borrowing, was 8.1% at the time of the deal announcement, suggesting Cox's bridge loan carries a significant spread above this level.

Analysis — what it means for markets / sectors / tickers

Second-order effects include potential pressure on the share prices of other Mexican independent power producers like Enel Mexico (ENELMEX.MX) and Acciona Energia (ANA.MC), as Cox's increased scale creates a more dominant competitor. Conversely, Spanish engineering and construction firms specializing in energy, such as Sener and Técnicas Reunidas (TRE.MC), may see new contract opportunities for maintaining and upgrading the acquired fleet. The deal's size could tighten credit spreads for high-grade Spanish corporate debt, as banks demonstrate appetite for large-scale, collateral-backed utility loans.

A key risk to this analysis is the refinancing risk embedded in the bridge loan. Market volatility or a deterioration in Cox's credit profile before the loan matures could force the company to accept punitive terms for permanent debt, diluting equity holders. Positioning data shows institutional investors have been net sellers of Cox Group shares over the last quarter, likely anticipating equity dilution from the eventual refinancing. Flow is moving into short-dated Spanish corporate bond ETFs as traders seek to capture the yield pickup from new utility debt issuance expected later this year.

Outlook — what to watch next

The primary catalyst is Cox Group's Q3 2026 earnings report, scheduled for 31 October 2026, which will provide the first detailed integration update and pro forma financials including the new assets. A secondary catalyst is the anticipated announcement of permanent financing for the bridge loan, expected before the end of Q4 2026, which will detail the final debt structure and cost. Market participants should also monitor the next Banxico policy meeting on 17 September 2026 for any shift in interest rate guidance that could affect refinancing costs.

Key levels to watch include Cox Group's credit default swap spreads; a move beyond 150 basis points would signal rising market concern. The company's stock price support level is €22.50, the 200-day moving average it briefly breached during the deal announcement. Resistance for the Mexican Peso (MXN) against the USD is at 16.50; a break above could increase the local currency cost of servicing the dollar-denominated portion of the bridge debt.

Frequently Asked Questions

What does a bridge loan mean for Cox Group's financial health?

A bridge loan is a short-term financing tool used to meet an immediate capital need, with the expectation it will be repaid quickly with longer-term debt or equity. For Cox Group, using a 54% bridge loan indicates a strategic decision to secure the assets now despite current high interest rates, betting it can refinance later under better conditions. The main financial health indicator to watch will be the interest rate and covenants on the permanent financing that replaces this bridge, as that will determine the long-term burden on the balance sheet.

How does this acquisition compare to other major energy deals in Latin America?

The $4.2 billion valuation is among the top three energy M&A transactions in Latin America since 2020. It is smaller than the $8.6 billion merger of Colombia's Ecopetrol with Interconexión Eléctrica in 2022 but larger than Engie's $1.4 billion sale of its Chilean transmission assets in 2023. Uniquely, this deal involves a European buyer expanding into Mexico through the acquisition of assets from another European seller, a pattern less common than regional consolidation or entry by North American firms.

What are the risks for Cox Group using its shares as collateral?

Using shares as collateral, or a share pledge, creates a direct link between the company's stock price and the loan's security. If Cox's share price falls significantly, it may trigger a margin call from the lending banks, forcing the company to post additional collateral or cash. This mechanism can create a negative feedback loop where stock declines lead to financial stress. It also signals strong confidence from the lenders in the fundamental value of Cox's equity, as they are willing to accept it as security for a multi-billion dollar loan.

Bottom Line

Cox Group’s aggressive bridge loan financing prioritizes asset capture over cost, betting it can refinance before volatile credit markets worsen.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.