Habitat Presents First Major New Agreement With A Debt Relief Of 85%

30/12/2014 – La Vanguardia

The company will pay back banks in three months and suppliers within a year and a half. The new repayment plan, which has already received considerable support, is a reality check.

Promociones Habitat was a protagonist in the largest receivership case in history of Catalonia of December 2008, with a debt of more than 2.8 billion euros. It presented a proposal to amend the agreement with creditors last week in the courts of Barcelona, which the judge approved in April 2010. This is the first major amended agreement proposal reaching the courts in Spain – an option which the government introduced with the last reform of the bankruptcy law in order to allow the continual existence of companies that agreed to a payment plan at the beginning of the crisis that they can no longer afford.

In the case of Habitat, there had already been breaches. A few weeks ago, the Royal Bank of Scotland filed a lawsuit against the company and asked the judge to order its liquidation. This legal action will not succeed because it came about when Habitat was about to present its new agreement proposal, which had already been accepted by the bank and SAREB — its top creditor — of more than 60% of its debt. Javier Castrodeza, from Cuatrecasas, has represented the banks throughout negotiations and Raimon Tagliavini, from Uriah, has defended the interests of Habitat.

The new agreement is, above all, realistic. There are no other options left, as there is almost nothing to distribute and the few assets remaining are not enough to cover the 1.2 billion euros still outstanding. This is the reason why Habitat has proposed to the banks an 85% relief of the initial debt within a repayment plan in which the remaining 15% due will include payables that have already been accumulated over the past four years.

The resulting amount shall be paid out in the form of land; the bank will also cover all legal and transaction costs as well as corresponding tax liabilities. The entire shareholder loan (400 million) will be forgiven. Deloitte and Valuation Society have estimated Habitat’s assets that creditors will be allocated by lottery. The process will consist of a repayment within three months after the new agreement is approved by the judge.

Unsecured creditors will also have to undergo a debt relief of 85%, but will be paid in cash: 20%, in three months; a further 30% in November 2015, and 50% in June 2016. Now, once the agreement is submitted, its processing will turn into a process which SAREB, Santander, BBVA and Popular — whose debt exceeds 50% of the liabilities — have already approved.

Predictably, the new Habitat agreement will put an end to the real estate company’s judicial history, preventing liquidation in legal terms,though not in practice. In 2008, the company fell victim to the ambition of its owner, Bruno Figueras, after the purchase of Ferrovial Real Estate for 2.2 billion euros in the eve of the crisis, back in December 2006. The burst of the bubble led the company to enter into an agreement with its creditors for the first time, which the subsequent Great Recession prevented it from complying with.

Original article: La Vanguardia (by Lalo Agustina)

Translation: Aura REE