Martinsa Heads For Liquidation With A €4,603m Deficit

2 March 2015 – Cinco Días

The real estate company halved its losses in 2014 (to €313 million) but that was still not enough to plug the hole

Martinsa Fadesa recorded an ‘equity shortfall’ of €4,603 million at the end of 2014, according to the annual results presented by the real estate company, which was plunged into liquidation last Thursday after it failed to obtain support from the banks for its latest proposed debt repayment plan.

The real estate company, which is owned and chaired by Fernando Martín, holds assets valued at €2,392 million to meet total liabilities of €6,995 million, of which €3,200 million corresponds to debt with financial entities.

Martinsa closed 2014 with a net loss of €313.6 million, an amount that represents a 51.9% reduction in the losses recorded one year earlier.

The decrease in the loss resulted from a reduction in the provisions made by the company against the impairment of its real estate assets, which amounted to just €179 million in 2014, i.e. 60% of the amounted provisioned in the previous year.

Nevertheless, the accounts of the real estate company in 2014 included €131 million of financial costs relating to bankruptcy debt, which corresponded to the bankruptcy process that the company was involved in between 2008 and 2011, the largest ever bankruptcy filed in Spain’s history.

The company’s lack of liquidity to meet the debt repayment schedule established as part of the agreement that was made in March 2011 to allow the company to emerge from bankruptcy, forced the company to begin negotiations with the banks at the end of 2013.

In December 2014, when a new debt payment fell due and given that it was impossible for the company to reach an agreement with the banks, Martinsa submitted a proposal to the court to unilaterally reform the 2011 agreement.

The judge gave the banks until 26 February to state their views regarding the plan, but the company failed to obtain backing from 75% of the creditors (the required threshold) before the deadline expired, according to sources close to the process.

The company will hold an extraordinary Board Meeting today (Monday 2 March 2015) to analyse its own request for liquidation.

House sales

Martinsa Fadesa faces liquidation despite the fact it managed to increase its turnover by 18.3% in 2014, to €130 million, according to the accounts it has submitted to the National Securities Market Commission (Comisión Nacional del Mercado de Valores or CNMV).

It generated this turnover through the delivery of 1,585 homes in 2014, more than double the number handed over in 2013, of which 482 were registered in Spain and 1,103 overseas.

Besides Spain, Martinsa Fadesa undertakes activity in France, Morocco, Mexico, Romania, Poland, the Czech Republic and Bulgaria, although its operations in the latter are also in liquidation.

All of the homes that were pre-sold by the real estate company in 2014 correspond to this international activity.

Original story: Cinco Días

Translation: Carmel Drake