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Vulture Funds Bid For Martinsa’s Debt

4 March 2015 – Expansión

Some new players may be joining Martinsa Fadesa’s liquidation process. The decision taken by the real estate company’s Board of Directors on Monday to approve the liquidation plan has attracted investment funds in to the fold, interested in buying up some of its debt.

“The liquidation process appeals to investors that want to buy cheap and are willing to wait a long time (to recover their investments) and obtain a significant profit in return”, explains Mercadeuda, a company that specialises in connecting holders of debt with potential buyers.

However, the offers that Martinsa’s creditors will receive will be very aggressive. “I do not think they will offer to pay more than 10% of the nominal (value of the debt). In fact, the most reasonable offers will likely range be between 3% and 5%”, says Rubén Barriocanal, Investment Manager at Mercadeuda.

Martinsa Fadesa has assets worth €2,392 million and debt of almost €7,000 million, according to information filed with the CNMV. Of that liability, around €712 million is senior debt, according to the most recently presented bankruptcy report. More than €3,600 million comprises ordinary loans and around €1,750 million are equity loans.

The company’s principal creditors include Sareb, CaixaBank, Popular and Abanca. “The banks hold senior debt, and therefore they would not be particularly interested in selling. Instead, the offers from these investors, with high-risk profiles, are targeted at the holders of ordinary loans, such as suppliers.

For now, the movements between debt holders seem to be limited. “The only funds that are exchanging debt on the secondary market are minority and the amounts involved are modest. Some of them are the same players who bought stakes of less than €10 million three and a half years ago”, explain the financial sources.

The main brokers in this transactions include Bank of America and Citi.

Original story: Expansión (by R. Ruiz and D. Badía)

Translation: Carmel Drake