Tag: creditors

The State Will Lose €1,000m From Martinsa’s Liquidation

4 March 2015 – Expansión

The collapse of the real estate company will result in losses of €1,000 million for Bankia and the ‘bad bank’.

According to experts, Blesa assumed ‘a high risk’ in the company for ‘possible favourable treatment’.

The State will become the biggest loser following the largest liquidation in Spain’s history. The bankruptcy of Martinsa Fadesa will have already cost Bankia – due to the loans it inherited from the savings banks it acquired – and the bad bank Sareb more than €1,000 million and this amount may end up exceeding €1,3000 million, according to sources from the real estate sector.

The Chairman of Martinsa Fadesa, Fernando Martín (pictured), has filed for the company’s liquidation after he failed to reach an agreement with its creditors, led by Sareb. The bad bank holds debt of more than €1,400 million that it inherited mainly from Caja Madrid, but also from other nationalised savings banks. According to sources at Martinsa, it would have been less costly for the bad bank – whose financial risk is guaranteed 100% by the State – to accept an agreement with Martín, because then it would have been able to recover at least 25% of its debt, but that now becomes impossible due to its bankruptcy.

Yesterday, various vulture funds offered to purchase Martinsa Fadesa’s debt for a discount of up to 96%, given the high probability that all of the creditors will lose the bulk of the funds they lent, according to market sources.

Sources at Sareb responded that, “unfortunately, the best option is the one that has gone ahead; there was no viable alternative in terms of (the real estate company’s) continuity”. At the bad bank, whose primary shareholder is the state-owned FROB, with a 45% stake, they think that it too early to talk about and quantify losses. They still think that they will be able to recover the amount loaned to Martinsa Fadesa from the liquidation of its assets in the full course of time.

Sareb is Martinsa’s main creditor with its aforementioned debt of €1,400 million, followed by CaixaBank (€908 million) and Banco Popular (€580 million). In total, the real estate company’s debt amounts to €7,000 million and the creditors consider that only €800 million of the real estate company’s assets have any value; they are going to dispute them to avoid Sareb taking a clean sweep.

The background to this disaster began in 2007 when, according to expert reports from the Bank of Spain, Caja Madrid became “one of the entities that assumed the most risk in the merger of Martinsa and Fadeas” when it assumed exposure in the real estate company amounting to €1,032 million “of which only 28% was secured”. The experts maintain that the then Chairman of Caja Madrid, Miguel Blesa, was incited by the offer of “possible favourable treatment” from the real estate company created by Fernando Martín. The person responsible for granting the loan at Caja Madrid, Carlos Vela, was hired by Martín as the new CEO but, one year later, he was recruited back to the savings bank again by Blesa, days before the real estate company logged its first suspension of payments. Subsequently, Caja Madrid’s exposure to Martinsa was taken on by the new BFA-Bankia group, together with other amounts from Bancaja and the other savings banks that were integrated as part of the merger. And in 2012, the European Union conditioned its bailout of the Spanish banking sector on the creation of Sareb, amongst other measures. The then new Chairman of Bankia, José Ignacio Goirigolzarri, transferred the toxic assets to Sareb at a discount of more than 50%, which represented the State’s first loss of more than €500 million in the case of Martinsa, although the entity did not disclose the actual amount. Other nationalised savings banks did the same thing, whereby converting Sareb into Martinsa Fadesa’s largest creditor.

Sareb was confident that, having purchased the debt at a discount, it would be able to recover and even make a profit on its exposure, if Martinsa Fadesa managed to improve its situation, however that proved impossible. Last year, Fernando Martín offered the bad bank a refinancing agreement, which involved a haircut of 66% in return for becoming a shareholder. Sareb ruled that option out as it questioned Martín’s management and the fact that the Chairman had earned a fixed salary of €1.5million per year despite the company’s woes.

Sources close to the property developer say that this salary “is negligible compared with the €2,400 million that he himself lost following the acquisition of Fadesa” and they deny that representatives from Sareb and from other banks had requested his departure during the final weeks in return for accepting the haircut. “They have not made that request in any of the meetings, on the contrary, they have asked him to continue at the helm”.

The creditor banks indicate that, like with all liquidation cases, there will now be an investigation to determine whether Martín is criminally liable; they criticise the fact that he has embarked on expensive adventures in recent months, such as filing the lawsuit against the former owner of Fadesa, Manuel Jove. “The legal costs of the defeat against Jove may exceed €60 million”. “False”,  reply Martinsa, “they will be less than €20 million”,.

Either way, the figures are vast, and mean that the real estate company becomes a symbol of the rise and fall of the property boom that was supported by the savings banks.

It now remains to be seen who will administer the complex liquidation process. The favourite, KPMG, may be conflicted out because it has worked with Sareb in the past.

Original story: Expansión

Translation: Carmel Drake

Martinsa’s Board Approves The Liquidation Of The RE Company

3 March 2015 – Cinco Días

The largest ever property and land sale in Spain’s history begins

Yesterday (Monday), Martinsa Fadesa held what will possibly be its last ever Board meeting. During the meeting, it was agreed that the company would begin liquidation proceedings and that today (Tuesday), it would file a petition to the Commercial Court in La Coruña, for the liquidation of the group, after its main creditors failed last week to approve the proposed agreement presented by the company.

Last week the deadline ended for Martinsa Fadesa’s creditors to sign up to (or reject) the proposed agreement presented by the company on 30 December 2014. According to financial sources, the main creditors, including Sareb, CaixaBank and Popular (which held €1,457.8 million, €907.9 million and €574.2 million of the company’s debt as at 30 June 2014, according to those sources) all opposed the agreement.

“Martinsa’s proposed agreement is not feasible, the business plan that has been presented is not credible”, said the financial sources. “As a result of the liquidation, the creditors will have access to €980 million in terms of asset value”, they maintain, “and the creditors will have access to more transparent information during the liquidation process”.

Martinsa Fadesa recorded a net negative equity position of €4,603.4 million at the end of 2014 (€4,288.6 million in 2011), according to the annual results presented by the real estate company to the CNMV. The company closed last year with assets worth €2,392 million and liabilities amounting to €6,995 million; it recorded losses of €313.6 million in 2014 (51.9% lower than in 2013) and increased its turnover by 18.3% to €130 million.

Between 2006 and 2007, Fernando Martín, the Chairman of Martinsa Fadesa, agreed to purchase Fadesa from Manuel Jove, in a transaction worth €4,045 million. In 2008, Martinsa Fadesa filed for bankruptcy and in 2011, it agreed a payment schedule to allow it to emerge from the bankruptcy situation. That same year, the company decided, in a shareholders’ meeting, to file a social responsibility claim against Jove and Fadesa’s former CEO, Antonio De la Morena for €1,576 million. Commercial Court number 1 in La Coruña and the Provincial Court of La Coruña both rejected the claim filed by Martinsa Fadesa and so the company appealed to the Supreme Court. Last month, the Supreme Court also rejected Fernando Martín’s claim.

For the last two years, Martinsa has failed to meet the payment commitments established in the agreement that allowed the company to emerge from its bankruptcy proceedings (these amounted to €451 million in 2014). The Supreme Court’s rejection of the company’s claim was the last straw for the real estate company. The group had assured its creditors that it would use the money to pay them if it won its appeal at the Supreme Court; however, having now lost its claim, the company will have to also pay the legal costs associated with the process, which legal sources estimate could amount to €60 million.

Experts in bankruptcy matters consider that Martinsa Fadesa’s liquidation process will be the largest to ever to take place in Spain.

The same experts explained that the bankruptcy judge may reinstate one, two or three members of the previous bankruptcy administration team, however given the size of the liquidation process that is now beginning, it would be usual for Ángel Martín Torres (KPMG), Antonio Moreno Rodríguez (Bankinter) and the lawyer Antonia Magdaleno to jointly take charge of the liquidation.

Claims of €34 million for construction defects

Martinsa Fadesa is facing 32 civil lawsuits of more than €50,000 (each) brought by groups of owners and individual owners for construction defects. At the presentation of its latest results, the company explained that the total amount claimed in these cases amounts to €34 million. In addition, the group is also facing other kinds of legal processes. One item that stands out is the €19.4 million provision that Martinsa has made in relation to the group’s development in Miño, La Coruña. “Claims have been filed with both the Commercial Registry and the Civil Registry by house buyers in this area, with the result that some of these cases have been declared resolved in the contracts, which means that the company will have to return the amounts received on account from these clients”, explained Martinsa Fadesa.

In its 2014 accounts, the company states that it has a deferred payment agreement with the Tax Authorities for the amount of its privileged bankruptcy debt, i.e. €47.68 million. That debt fell/falls due on 20 December 2014 (€9.6 million) and 20 December 2015 (€38 million), respectively. Martinsa requested and obtained “reconsideration of the due date of the instalment relating to 2014” from the Tax Authorities. The new payment date has been set for 20 May.

In 2014, Martinsa Fadesa employed 150 people (161 people in 2013). Last year, the group incurred staff costs amounting to €14.3 million (€12.9 million in 2013).

Original story: Cinco Días (by Alberto Ortín)

Translation: Carmel Drake

Edival Files For Bankruptcy

20 January 2015 – El País

The company failed to reach an agreement with its creditors.

The real estate company Edival, which became one of the leading companies in the sector in Valencia, has filed for bankruptcy. Mercantile Court No. 2 in Valencia passed the bankruptcy order, which had been requested by the company after it failed to reach an agreement with its creditors.

Edival, led by Manual Puchades until his death, when he was succeeded by his sister, Teresa, had managed to weather seven very difficult years for the real estate market without resorting to bankruptcy, but that has now become inevitable.

Going forward, the company will be managed by an insolvency administrator, and creditors have one month to submit their claims for inclusion on the list under bankruptcy law.

The company, which had an important presence in other regions besides Valencia, including Murcia and Madrid, promoted numerous social housing developments and recorded huge results in the years of the construction boom.

In 2006, for example, it recorded a turnover of €144 million and profits of €22.6 million, an increase of 39% on the previous year. When the crisis hit, however, Edival had bank debt amounting to almost €500 million, which it has failed to assimilate on its own.

Original story: El Páis (by Ignacio Zafra)

Translation: Carmel Drake