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No Agreement Between Martinsa & Lenders, Liquidation Looms

18/12/2014 – Expansion

Talks between Martinsa Fadesa and its creditors are finishing with quite bad prospects for the real estate company. According to sources with knowledge of the negotiations, uncompromising position of the firm’s chairman is hindering the agreement.

Before December 31, Martinsa must pay-off 23% of its financial debt, currently amounting to 3.5 billion euros. If not defrayed, the company will inevitably be dissolved.

Since the very first moment, the group of creditors led by main lenders Sareb, Popular and CaixaBank were in favor of negotiations and even an 80% forgiveness.

However, in exchange, the entites asked for shares in management of the company and debt-for-equity swaps, opening them the door to Martinsa’s capital.

Fernando Martin (pictured) has rejected the move and moreover, he is claiming a new credit line assuming much more attractive conditions than those ruling the market (at a 1% interest rate). The fresh capital injection would serve to repay 700 million debt to the creditors and the Treasury.

Facing such a set of terms and conditions, banks started to study possible liquidation of the property manager that enjoyed success in 2006 after buying-out Fadesa for more than 4 billion euros.

New Bankruptcy Law

In November, Martinsa announced it would include the new regulation on insolvency which allows the firms in financial troubles to review creditors’ meeting and talk on relaxing the conditions. In 2011, when Martinsa managed to crawl out from the biggest bankruptcy process in Spain, it promised to pay 100% of the debt within 10 years.

Deficit of Martinsa Fadesa reached 4.51 billion euros. What makes its situation worse, during the nine months from January to September, the company lost more than 200 million euros. As of December 31, its assets represent a worth of 2.9 billion euros.

 

Original story: Expansión (by S. Arancibia & R. Ruiz)

Translation: AURA REE