26 February 2015 – Cinco Días
Sareb held an ordinary Board meeting yesterday (as it does once a month) with the case of Martinsa Fadesa on the table. The creditor banks of the real estate company have until today, Thursday, to decide whether or not to approve the new proposed agreement presented by the company to avoid its liquidation. According to financial sources, the debt obligations that Sareb holds in Martinsa Fadesa amounted to €1,457.8 million as at June 2014. The (real estate company’s) second largest creditor is Caixabank with €907.9 million.
Martinsa Fadesa submitted a new proposed agreement to avoid its liquidation to its creditors on 30 December, since it is unable to make some of the payments stipulated in the previous agreement. Under the new proposal, the company highlighted that if it won its claim in the Supreme Court against Manuel Jove, the former chairman of Fadesa, against whom it had filed a multi-million euro lawsuit, then it would allocate the resources to pay its creditors.
Fernando Martín (pictured above) agreed the purchase of Fadesa from Manuel Jose between 2006 and 2007, in a transaction valued at €4,045 million. In 2008, Martinsa Fadesa filed for bankruptcy, the largest ever case in Spain, with debts of approximately €7,000 million. In 2011, the company reached a payment agreement with its creditors and so emerged from bankruptcy. That same year, the company decided, in its shareholders’ meeting, to file a social responsibility claim against Jove and the former CEO of the company, Antonio De la Morena, for €1,576 million. The former Chairman of Fadesa, who is now the Chairman of the Inveravante group, said then that the measure was “absolute nonsense”. The Commercial Court number 1 in La Coruña and the Provincial Court of La Coruña rejected the claim filed by Martinsa Fadesa, and so the company appealed to the Supreme Court. This month, the Supreme Court also rejected Fernando Martín’s claim.
The blow dealt by the Supreme Court to Martinsa Fadesa damages the real estate company’s prospects of avoiding liquidation even further. In addition, the Supreme Court ordered the company to pay all of the legal costs, which will require the immediate disbursement of several million euros (up to €60 million, according to legal sources).
Between January and September 2014, Martinsa generated turnover of €95.2 million, an increase of €24.5 million on the same period in the previous year, and it recorded losses of €201.6 million (vs. losses of €322.9 million during the first three quarters of 2012). In 2013, the group lost €652 million, and recorded negative equity of €4,288 million.
Like many other real estate companies, despite having a negative net equity balance, Martinsa avoided the requirement for dissolution under the Companies’ Act, thanks to Royal Decree Law 10/2008, which removes the requirement to account for impairments relating to real estate investments. Martinsa’s financial position is clearly very delicate and may be further compounded by the fact that the Government may decide not to renew the relevant regulation this year.
Representatives of the creditors met with the company last week and called for the departure of Fernando Martín as owner and shareholder, according to sources. Although liquidation may seem like the most logical course of action for the company, the same sources do not rule out the possibility of a last minute agreement being reached to avoid that measure.
Original story: Cinco Días (by Alberto Ortín Ramón)
Translation: Carmel Drake