Vulture Funds Buy Debt to Control Companies

6/02/2014 – Expansion

Many Spanish companies´s struggling to creep out from their debt unfortunately ended up in hands of their lenders. For instance, Colonial, Pescanova, La Seda or Codere.

There arrived hedge funds like Brookfield, Anchorage, Ceterbridge, Canyon and Silverlight that bought their debt with bargains. Banks eagerly get rid of the credits. Although the vulture funds rarely benefit from financing the debts, when they do find interesting assets they swap the debt for the assets.

Success & Failure

Pescanova is the latest target of the funds, that have taken advantage of the group bleeding out and bought its debt with 90% discount, and then poised for possible debt capitalization. They also sneak around Codere, being under the creditors´arrangmeents, the breeding gound for vulture funds.

In 2013, the U.S. fund Anchorage bought €100 million in credits of La Seda, becoming its main lender. (…)

An example of failure could be recalled in case of Brookfield, whose proposal on swapping €828 million was rejected by Colonial. (…).

Also, a group of hedge funds bought 25% of Propinvest´s debt in January.

The vulture funds have a blitz on Realia, since FCC and Bankia have decided to jointly sell their shareholding in the real estate. Sareb, the principal creditor of Realia, sold €437 millon debt to Fortress, while Santander transferred €100 millon of the same debt to Centerbridge. (…)

Colonial

After the entrance of Villar Mir, Santo Domingo and Mora Banc in Colonial, the real estate was trubled by Brookfield´s breach. The Canadian fund became its main lender after buying a part of debt from RBS in summer. Owning 46% of liabilities (€828 million), the company suggested swapping the €1.800 million sindicate credit for capital enlargement. The offer has been rejected.

Codere

The tension between the company and its lenders reach fever pitch. On one part, there are the funds that bought bonds issued in 2007 and 2012 worth €1.000 million. On the other side, the hedge funds that got a credit line in 2013. To dodge the arrangements, the bond holders propose to condone €350 million of debt, reduce interests and inject €400 million, in exchange of 82,5% of the capital.

La Seda

A year ago, the U.S. fund Anchorage bought €100 million in debt of chemistry group La Seda in view of its capitalization. BA Vidro, main shareholder, objected to the measure and at the end the company was shutdown.

Pescanova

The funds took positions in the fainting group. The Royal Bank of Scotland (RBS), possessing a €70 million debt in the company, sold it with 90% discount to York Capital that acquired €100 million more in bonds.

 

Original article: ExpansiónPro (J.M.)

Translation: AURA REE

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