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Martinsa And Reyal Face Liquidation With €7.5 Billion In Debt
22/12/2014 – Expansión
FUTURE / These two real estate companies are on the brink of extinction as they have not yet reached an agreement with their creditors to restructure their balance sheets. In January, the extension of the legal provision allowing them to not record their assets’ losses in value will end.
Once giants in the Spanish economy and now on the brink of disappearing — this is the bitter road that Martinsa Fadesa and Reyal Urbis have been on over the last eight years. The future does not look so bright for the two largest real estate companies of the last decade, as they have not yet reached an agreement with their banks to clean up their accounts.
The two real estate companies’ financial debt totals at more than €7.5 billion; liabilities that stem from the financing obtained throughout the real estate bubble and that the companies have been bearing over the last couple of years in their balance sheets.
The most extreme case is that of Reyal Urbis. The real estate company filed for bankruptcy in February 2013 and has not yet reached an agreement concerning its financial situation. With a debt of €3.978 billion, according to the bankruptcy report, in addition to a net worth gap of €2.878 billion, Rafael Santamaría’s company only has assets worth €1.474 billion. After four refinancing attempts, the banks have chosen to agree with the realtor to sell off some of its assets in order to obtain liquidity. Without these properties, which used to generate the little income it has now, Reyal Urbis looks headed towards an orderly liquidation process.
No agreement
Although it seems as though Reyal’s future will be decided next year, Martinsa Fadesa’s future will be known shortly. The realtor has been negotiating new payment conditions with its creditor bank for the past eight months, after failing to cope with the first debt reimbursement in December 2013 that was set forth in the agreement resulting from the bankruptcy proceedings in 2011.
The real estate company, which owes €3.5 billion to its banks in addition to the liabilities of commercial creditors and the tax agency, only sees one viable option: to receive relief on 80% of its debt and pay off the rest with its assets or shares, especially those of its foreign subsidiaries. The bank would accept a significant debt relief in exchange for Fernando Martin, president and leading shareholder of the group, ceding some degree of control over the management of the company.
These entities, which are awaiting a new proposal from Fernando Martín, firmly rejected the company’s last request for refinancing on favorable conditions. Since there is no agreement as of yet, the creditors are already preparing for liquidation of the company.
Another real estate company that finds itself in trouble is Nozar. In the case of the Nozaleda family’s real estate company, which filed for bankruptcy in 2009, the financial institutions are in opposition and have not yet come to an agreement. While Iberia Investments Limited, Hypothekenbank Frankfurt, Sabadell and Bankia have backed a proposal which includes a debt relief of up to 50%; BBVA, Santander, Popular and CaixaBank have opposed it. The bankruptcy trustees do not support this plan either.
After having approved the agreement in September, the judge must respond to the appeal. In this case, an agreement between the creditors and the Nozaleda family does not seem possible, thereby placing the final decision in the hands of judicial authorities.
Negotiations between these three real estate companies and their creditors took place just a few weeks prior to expiry of the extension of the Royal Decree-Act 10/2008, which allows companies to avoid dissolving due to the losses generated by depreciation of assets. In the last extension, granted earlier this year, Spanish Government officials warned that this was the last time the law could be extended and called on troubled companies to sort out their situation within 12 months. Now, even amongst industry insiders, it is understood that a further extension would be meaningless, having had six years to solve their financial problems. Without further extension, Reyal Urbis and Martinsa Fadesa will file for liquidation, so the next days seem vital for their future.
Original article: Expansión (by Rocío Ruiz)