11 September 2017 – El Confidencial
The appetite that international funds have unleashed for the Spanish real estate market has led Sacyr to redouble its negotiations with the creditor entities of its property developer subsidiary, Vallehermoso. The aim is to accelerate the settlement of that firm’s liabilities in order to sell off the last remains of the company, which is now just a shadow of what it used to be, but which is still a recognised brand in the market.
That is precisely the card that Sacyr wants to play: to take advantage of the appetite from the large overseas investors, to offer them a platform with extensive experience in the domestic property development market and which represents a household name for buyers. But, before reaching that point, it needs to complete the group’s financial clean-up.
The company chaired by Manuel Manrique acknowledges in its accounts for the first half of this year that “the negotiations with the creditor financial institutions progressed to decrease the debt significantly during the year”. Vallehermoso closed 2016 with financial commitments of €30 million, a similar figure to the previous year, but it managed to reduce its losses from €32.5 million to €7 million.
Sacyr is confident about its ability to pay off the liabilities of its subsidiary within one year and therefore be in a position to sell the company within the same time frame. Nevertheless, no formal sales mandate currently exists or is being organised, since all efforts are being focused on first achieving an agreement with the banks.
Vallehermoso’s current assets are worth €135 million, according to the latest appraisal performed by Gesvalt at the end of 2016. Of that amount, €129.9 million corresponds to land and €5.1 million to finished products and real estate investments. These figures are a far cry from the assets worth €7,000 million that the company held under its umbrella before the crisis, a giant that is already a distant memory and of which barely nothing remains after seven consecutive years of losses.
In fact, in February 2015, Sacyr was forced to come to the rescue of its subsidiary and inject €248.4 million to re-establish its equity balance, given that the property developer had closed the previous year on the verge of bankruptcy, with net assets amounting to less than half its share capital.
Nevertheless, since then, Vallehermoso has succeeded in convincing its creditor banks to accept discounts on the sales they are undertaking in order to accelerate the unblocking of finished assets, at the same time as sealing “daciones en pago” to also offload land, a strategy that Sacyr is confident of being able to redouble this year to finish cleaning up the company and getting it ready to sell (…).
A step-by-step liquidation
In 2013 (…), the infrastructure group decided to deconsolidate its property developer subsidiary and account for it as an available-for-sale asset (…).
A year later, at the end of 2014, Sacyr transferred assets worth €1,000 million from Vallehermoso to Sareb in two consecutive operations, which meant the practical liquidation of the group (…).
Since then, Sacyr has held onto Vallehermoso as an available-for-sale asset. So far it has not managed to close the sale, but it is confident that it will be able to within the next few months, if the new round of conversations with its financial institutions yield the expected results.
Original story: El Confidencial (by R. Ugalde)
Translation: Carmel Drake