29/12/2014 – El Confidencial
The 14 banks which have been discussing these days the survival of Martinsa Fadesa have ruthlessly delegated their representation on a steering committee, formed by four major entities, which are the following, in order of their shares as creditors: the so-called ‘bad bank’ SAREB and the allegedly ‘good’ ones La Caixa , Popular and Abanca, formerly NovaCaixaGalicia.
The quartet has not stopped giving thumbs up as a sign of acceptance of the newly-drawn agreement proposal submitted by the company and the specter of liquidation is beginning to seem nothing more than desperate attempt to bluff on behalf of Fernando Martín.
In just 48 hours all question marks will disappear, as this Tuesday, at the end of the year, the realtor must present its new refinancing agreement before the Court no matter what.
Otherwise, all bets are off for the company which declared a default in July 2008 with a record debt currently totaling at 7 billion euros. Apart from the chilling scale of these figures, Martinsa’s disappearance would expose the claim about the end of the crisis that Mariano Rajoy wants to brandish as an achievement on his curriculum vitae for next elections. The housing market is beginning to awaken from the coma induced by the housing bubble’s burst and the demise of one of its most distinguished player would not exactly be a good reason to look forward to 2015 with optimism.
The exuberance, brought about by loans to developers in the middle of the last decade, stirred up the flame among thrill-seekers who – convinced they could do away with business cycle theory – defied the laws of economic gravity. There was not enough shrewdness to foresee the end of the spell that many associated with a fake miracle; however, those who fell down were as guilty as those who pushed towards the abyss. This is why the banking system had to be bailed out to avoid overall uncertainty in the country. Now in the wake of recovery, it would be an ill-omened contradiction in terms to let a corporate bankruptcy of this magnitude to take place for no reason. There could be no worse disaster possible at this time than the liquidation of a group employing 3,500 workers, for the most part indirectly, and consisting of 80 companies with about 5,000 urban development projects underway, in addition to 1,500 housing units under construction and 850 contracts outstanding with customers.
New regulation on defaults
Martinsa’s bailout, also coined under the pompous designation the ‘Aurora Project’, constitutes a veritable challenge for the Government, a sort of Litmus test to demonstrate the validity of the Royal Decree on urgent measures regarding receivership, now being processed as a bill in Congress. Luis de Guindos, Spain’s Minister of Economy and Competitiveness, has taken great pains to extend the advantages granted in the pre-bankruptcy phase to ensure the renegotiation of agreements, in a clear wink to the real estate company which has been debating these days whether to remain in the intensive care unit of the banking system.
Political determination to avoid bankruptcy of operationally viable businesses is a ‘letter of safe -passage” ensuring a favorable starting point for Martinsa’s refinancing. SAREB, as the state-controlled entity in charge of the reorganization of the banking system and recovery of the housing market, is willing to back this new agreement. This is a ‘detail’ truly worth keeping in mind as far as bad bank is concerned; as the heir of Bankia’s debts, it is now the number-one creditor of the real estate company headed by Fernando Martín, with 21% of its ordinary debt.
“Political determination to avoid bankruptcy of operationally viable businesses is a ‘letter of safe -passage” ensuring a favorable starting point for Martinsa’s refinancing.”
The company’s total liabilities amounted to 6.915 billion euros, but the financial relief and bailout went mostly for its €3.537-billion financial debt. The rest are mortgage loans, privileged and subordinated debt, plus stockholder’s loans and commercial debt. Martinsa proposes payment of 34% after a debt relief of 66% which would require it to gather adherents of a minimum of 75% debt to approve the agreement secured creditors. Any option below this bar would be desirable but impossible, in which case the company could save itself the trip to La Coruña because the Commercial Court No. 1 of the Galician capital would have no choice but to urge liquidation as a mere formality.
Isidro Faine has the final say
The 14 syndicated banks around the realtor account for 84% of its ordinary debt so any entity owning more than 9% of it has the right to decide on the outcome of the company. This is the case of SAREB as well as CaixaBank, whose share accounts for 16% of the liability. These two entities are taking the lead in the negotiations and their driving force is essential for Martinsa’s salvation or doom. If we consider that SAREB, chaired by Belén Romana, has refused in advance to serve as the hatchet man in this case, everything seems to indicate that it will be Isidro Fainé who will have the last word on Martinsa’s fate.
The newly-drawn agreement proposal includes the option to hand over majority ownership of the company to the group of creditor banks within a timeframe of up to nine years but which could be shortened to only four years. Financial institutions would thus control 70% of the capital, while Martin and his partners – the remaining 30%. Management would remain in the hands of the current president, although the new agreement has a provision for setting up of a monitoring committee comprised of the creditors that keep a watchful eye on all strategic decisions of the real estate giant.
The new Martinsa would also capitalize on debts amounting to 3,000 million to secure a balance position that brightens up the future of the company until the housing market’s gloomy days are definitively over. The ‘Aurora Project’ outlines a company with 890 million in assets, 680 million in liabilities and owners’ equity of 169 million. With these figures, the New Year may mark the the beginning of a new life for Martinsa, along with the banks. Otherwise, it will be a dissolution verdict, the end of the company and dividing up its remaining assets among over 6,000 creditors in the largest bankruptcy in Spain’s corporate history.
Original article: El Confidencial (by José Antonio Navas)
Translation: Aura REE