Martinsa Challenges Creditor Banks By Going To Court Without Agreement

31/12/2014 – Expansión

NEW PROPOSAL / The realtor should have paid back 23% of its debt today, but for now it is escaping liquidation by requesting amendment to the terms of its agreement from the commercial court.

Martinsa Fadesa is in a new headlong rush to avoid liquidation. The realtor, headed by Fernando Martín, presented yesterday at the Commercial Court of A Coruña a request to amend the agreement with creditors which allowed it to lift from receivership in 2011, being the most important such case in Spanish corporate history.
This step means a challenge to the creditor banks but thanks to it, Martinsa avoided, in dire straits, liquidation, since the company failed to abide by the repayment schedule agreed with its creditors for a second consecutive year. Specifically, the group controlled by Martín had to repay today, at the end of the year, 23% of its debt, amounting to 3.5 billion euros.

Unable to repay and having failed in the negotiations with banks, Martinsa welcomed the new rules adopted by the Government in September to allow the continual existence of companies that agreed to a repayment plan at the beginning of the crisis and cannot afford to follow it today. This formula, known as reconvenio (new agreement or re-agreement), has just been tried by Habitat, who starred in another major insolvency case back in 2008 in the sector.

Discrepancies

Martinsa Fadesa’s decision to go to court to request a new agreement involves an all-or-nothing move of a dozen of the company’s creditor banks that have not wanted to accept the new terms offered by the company. The negotiations held over the past three months ended without agreement on Monday, as banks and SAREB consider the company’s proposal unviable and unserious. “What we are asking is that Martinsa make a refinancing proposal consistent with the enormous debt it has,” says a representative of one of the consulted banks, upset by the fact that Martin wants to send out the message that it’s the banks who do not want to sign an agreement. “We’re not giving up but we’re dealing with unviable proposals that overestimate the value of their assets,” they explain.

The new agreement proposal submitted to the judge in La Coruña — and whose specific terms remain unknown — is a reformulation of the plan that has been proposed so far by Martinsa to the banks – transfer of ownership of a 70% stake in exchange for debt reduction. Yesterday the company notified the National Securities Market Commision (CNMV) that it will now be up to the commercial judge to change terms of the proposal for the different creditors. However, creditors holding 75% of ordinary debt as well as the judge will have to give their approval in order for the new agreement to succeed. According to the realtor, the final draft of the proposed amendment will be submitted to the market regulator, “as soon as the transfer of ownership to the creditors proceedings are initiated.”

Martinsa was the star of the Spanish real estate boom. The company bought the listed Fadesa for more than 4 billion, but the collapse of sales in the beginning of the crisis led it to receivership in 2008 with 7.5 billion in debt.

Original article: Expansión (by S. Saborit)

Translation: Aura REE

39