Metrovacesa To Carve Out Property Development Business

28 December 2015 – El Economista

Metrovacesa will hold an extraordinary shareholders meeting on Tuesday (29 December) to approve its division into two companies, so that it can segregate its entire land, development and house sale business, currently controlled by Santander, into a separate company.

This development activity will be transferred into a newly created company, called Metrovacesa Suelo y Promoción, which will take on assets and liabilities with a net value of €1,000 million.

This new company will have the same shareholders, with the same percentage stakes as Metrovacesa’s currently ownership structure. Therefore, in addition to Santander, which will control 72% of Metrovacesa, the other shareholders with be BBVA with a 19.4% stake and Banco Popular, with a 8% stake.

Meanwhile, the current Metrovacesa company will retain the the real estate business, in other words, it will continue to hold the portfolio of properties (with a combined surface area of 1.1 million m2) comprising office buildings, shopping centres and hotels, mainly located in Madrid and Barcelona, which are operated under lease agreements.

This operation to separate the businesses into different companies forms part of the debt restructuring programme that the real estate company is working on ahead of the “significant maturity” of its liabilities, primary linked to the real estate developer business, which fall due in the third quarter of 2016.

The ultimate goal is to capitalise this debt, strengthen the company’s equity and thereby guarantee the future viability and profitability of the two businesses, according to the company’s comments in its carve-out plan.

Segregation process

The division of the current Metrovacesa entity into two companies will take place through a process involving three successive capital increases, which will be approved at the shareholders’ meeting on Tuesday.

The first increase will be non-monetary, but will involve the shareholder banks contributing certain real estate assets to the company. The second increase will involve the capitalisation of the debt held by these entities for conversion into new shares.

Meanwhile, the third increase will be monetary and will be aimed at the minority shareholders who still hold shares representing 0.073% of Metrovacesa’s share capital, so that their stakes are not diluted.

Once these capital increases have been completed, the new Metrovacesa Promoción y Suelo company will proceed make a block acquisition of all of the assets relating to this business from Metrovacesa.

This final carve-out step will be ratified at another extraordinary shareholders’ meeting, scheduled for 12 January, when the board of the new company will also be appointed.

In this way, Metrovacesa is embarking upon a new phase in its history, years after Santander and other banks took control of the real estate company, by foreclosing the debt held by its former owners, and excluded it from the stock exchange.

Original story: El Economista

Translation: Carmel Drake