10 March 2015 – Expansión
Negotiations / The real estate company’s main creditor shares the legal concerns raised by the judge regarding the proposed agreement. If they are addressed, a discount of up to 93% could be accepted.
The real estate company Reyal Urbis is using up its last options to save itself from liquidation. The company submitted a proposed agreement on 13 February, which must be approved or rejected by its creditors before next Friday 13 March. Nevertheless, the proposal that has been presented has raised important questions that have lead the judge in charge of the bankruptcy process to reject the offer and ask Reyal for a series of changes and clarifications.
The judge from the Commercial Court number 6 in Madrid is not the only party for whom this proposal to exit the bankruptcy process has raised doubts. Sareb, the main creditor of Reyal Urbis with a debt of €785 million, sent a letter to the court last week expressing its concerns. Last Friday, the judge himself made these concerns clear through a series of requests to the real estate company. One of Sareb’s demands is to know the current value of Reyal Urbis’ assets, through the performance of a new appraisal.
One of the aspects that has generated the most doubt, for both the judge and Sareb, relates to the application of the agreements and waivers to all of the creditors, even those that do not sign up to the agreement. Reyal is making its own interpretation of the recent regulatory changes in the bankruptcy law whereby, if 75% of the creditors adhere to the payment proposal, then rest should waive the mortgage rights they obtained during the four refinancings that the company signed before it filed for bankruptcy. The judge considers that it cannot be assumed that all of the creditors will waive (their rights) or that the “knock-on effect” will apply.
Another controversial point is the high percentage of the discount that Reyal is calling for, which ranges between 88% and 93% for the creditors with syndicated debt (which includes Sareb and entities such as Santander, RBS and Barclays), without offering a credible business plan. In his ruling, the judge demands that (Reyal Urbis) “correct the weaknesses identified in its feasibility plan, in order to provide the necessary and essential objective justification of the discounts requested”.
Reyal has until the end of March to clarify these points and also whether it has a parallel agreement with the Tax Authorities. The real estate company intends to use some of the assets that it does not grant to the creditors (valued at €260 million and chosen by the company) as a guarantee to the Tax Administration.
With the new proposal on the table that resolves the possible uncertainties regarding the distribution of assets, the creditors will consider whether to sign up to the agreement, or conversely, let the real estate company go under, as happened with its counterpart Martinsa Fadesa. Sources close to the creditors believe that the two cases are not the same and that the entities may give Reyal a chance, just like they did with Fernando Martín’s company in 2011.
Original story: Expansión (by Rocío Ruiz)
Translation: Carmel Drake