Blackstone Accuses FCC Of €200 Mn Debt Forgiveness Coercion

7/01/2015 – El Confidencial

Recently, contractor FCC has successfully increased its capital by 1 billion euros. However, celebration didn’t last long as several creditors of the firm filed a collective lawsuit against ‘forced’ loan forgiveness. Among the plaintiffs one may find GSO, an affiliate of Blackstone.

According to financial sources, the group of lenders behind the legal action is going to provide necessary documents proving that FCC made them forgive a 200 million debt corresponding to 1.35 billion B-tranche of the holding’s corporate debt. Approval has been given by 85% of the creditors with the remaining 15% condoned.

Precisely, 75% of the debt was owed to six leading Spanish banks – Santander, BBVA, CaixaBank, Bankia, Sabadell and Popular – called G6 and which said ‘yes’ to the forgiveness. FCC took for granted that the rest of the lenders agreed as well. But several funds, waiting for repayment of more than 500 million euros in total, have rejected the proposal and went to the court.

This is the first lawsuit against a Spanish company caused by a dissent in a debt restructuring process.

The vulture fund of Blackstone, GSO, lent 350 million euros to FCC’s Giant in 2012. Moreover, the arm holds a claim to a part of 1 billion euros in loans of Cementos Portland.

The funds hired law office Boies, Schiller & Flexner. They say the ‘sacrifice is disproportioned’ as forced forgiveness does not apply to capital increase but to liquidation.

The situation is so complex that Carlos Slim, the new majority stakeholder in FCC, has suggested the opposing lenders should consider signing the relief agreement if they want to participate in operations planned by the magnate. Blackstone replied the act would not only be harmful for the creditors but also for the reputation of FCC on the market.

 

Original story: El Confidencial (by Agustín Marco)

Translation: AURA REE

Developers More Indebted Than Mortgagors

19/12/2014 – El Pais

Default on mortgages for home purchase held by individual customers screeched down and halted at 6% at the end of September. The number is a copy of 2013, when it showed 5.99%. Just the opposite happens in the property sector, whose indebtness increased by 37.4% year-on-year, the Bank of Spain reported.

At the end of the third quarter, non-performing mortgage loans amounted to nearly 35.21 billion euros inside the total credit portfolio of 586.09 billion. In turn, the developer debt owed to Spanish banks was reaching almost 156.2 billion in September, of which 58.49 billion or 37,4 % were delinquent. This means a 33.6% increase from the last year, and a 38% fall in respect to the end of 2013.

 

Original article: El País (by S. L. L.)

Translation: AURA REE

Spanish Banks’ NPL Ratio Falls to 12.9% in October

18/12/2014 – Invertia

According to the provisional data published by the Bank of Spain today, the total value of soured loans dropped to 178.38 billion euros, levelling out to June 2013.

The default rate links seven consecutive months of decline, however it is not so visible as the current credit balance shrank by 0.43%. Precisely, the sector’s overall credit registered in October showed by 6.01 billion euros less than in September.

Not taking into account the recent methodological changes, the non-performing loan rate would stand at 13.16%, down from the previous month’s 1.38 billion euros to 1.35 billion.

The default dipped down in December 2012 and February 2013 as a result of accounting changes after the bad bank of Spain received toxic asset transfers from main entites (Bankia, NCG Banco, Catalunya Caixa, Ceiss, BMN and Caja3) in two phases.

The financial entities maintain their provisions, although there have been some cuts in October bringing them down to 105.74 billion euros. In September, it showed an amount of 106.67 billion.

Progressive Fall to 10% Forecasted For 2015

Antonio Marcos, an analyst at XTB, estimates that the rate will sit at 10% in 2015 due to reduction in non-payment and an increase in lending to companies and families.

Original story: Invertia

Translation: AURA REE

Spanish House-Building Awakening After Seven Years of Hibernation

17/12/2014 – Invertia

On a busy street in the heart of Madrid, Juan Jose Perucho shows where he is going to raise one of the tallest residential blocks seen in the capital, on a piece of land equal to five-times the size of a football pitch area which he bought from Madrid’s subway in November.

‘We have sold-out the developement faster than ever’, said the chief executive of real estate firm Ibosa referring to a 25-storey tower with a swimming pool and hanging gardens. ‘I have never seen anything like that during my 24 years in the business’.

The country, where the view of working cranes has been a daily bread for decades, shakily starts to take steps towards the activity after seven tough years which came after the real estate bubble burst.

In the three months from June to September, residential construction has registered its first quarterly rise since the recession began.

But while data proves growing confidence of Spaniards in their economy faring better, experts agree the odds are low for the activity to go back to the pre-crisis level.

Today’s c0nstruction in Spain accounts for 5% of its GDP, or 50 billion euros, compared to the 10% share the industry had during the real estate boom.

Also, the sector employs nearly a half less than before the market crashed in 2008, showing no projections for an abrupt rebound.

At the heights of its building frenzy, Spain was raising more dwellings annually than Germany, France and Italy altogether. The activity has left a stock of 740.000 unsold new homes, with no prompt outlook for their absorption as many of them are located out of big cities, in areas like Guadalajara or La Rioja, where demand is difficult to detect.

Spanish banks, with 161 million euros in loans to builders, many of them troublesome, have pushed new lending cautiousness to the limits, approving exclusively upmarket developments in Madrid and Barcelona, where prices slightly started to rise.

Moreover, developers have to have at least 50% of apartments sold off-plan before the financing agreements are sealed. Also, they must pay for the land out of their own pockets and put around half of the building costs, too, said banking sources.

But even with the strict lending conditions, so much different from the construction bonanza decade when even a small bricklayer could enjoy unlimited financing from banks, there are more projects than last year, especially in regard to Madrid and Barcelona.

From January to October, the City Hall of Madrid gave out 3.131 permits for new residential construction, more than it granded during the entirety of 2013.

Another property manager, Domo, is planning to construct a new block of apartments on a plot located in exclusive Chamberi neighbourhood and acquired from the Ministry of Defense in November.

The banks, seeing their margins dipping down and selective when it comes to elegible customers, bet on high-end homes as a way of capturing wealthy customers who could be subsequently offered other products.

Although 80% of Spaniards own their houses, a double of the eurozone average, new mortgage amount has declined by one-tenth if compared to 127.233 real estate loans ceded in March 2006.

‘One of the biggest motivations to finance developers again is to capture mortgage holders’, said Joan Bertran, director of real estate investment at Banco Sabadell.

As a year ago the bank would sniff at loan applications for property developement, today the executive and his team are weighting up 150 of them. Already approved are eight new investments in Madrid and a similar amount in Barcelona.

Coming back to the former Metro plot where Madrid’s tallest residential tower is going to stand on, Mr Perucho obtained financing from CaixaBank. The developer claims that most of the buyers are Spanish and they treat the properties as places to live in, not to invest in.

Mr Perucho explained that noteworthy is the percetage of the Spaniards who currently work abroad at very well-paid positions, as a prove of specialists helping the country to crawl out from the recession.

In these extremely selective circumstances when thousands of apartments remain unsold for years, the most savvy real estate firms brace for biddings of other developable lots in large cities showing significant interest, like the spot currently occupied by the Atletico de Madrid football club’s stadium located at a bank of the Manzanares River.

‘It is a return to relatively normal activity, and not a boom at all’, Mr Perucho said. ‘The market has been absolutely inactive for seven years and there comes the unleashed demand’.

 

Original story: Invertia (after: Reuters, by Sonya Dowsett)

Translation: AURA REE

Evictions Bounce Back in Third Quarter Going 7.3% Up YoY

15/12/2014 – El Confidencial

Evictions from all kinds of properties increased by 7.3% year-on-year in the third quarter and marked 13.341 lawsuits, according to data by the General Council of Judiciary. Mortgage-caused evictions represented 43.4% of the total, by 22.1% more from Q3 2013, and 51.3% derived from the Law of Urban Rent, going up 4.2%, while the remaining 5.2% corresponded to other reasons.

By Spanish regions, Catalonia concentrated 22.2% of all cases, followed by the Valencian Community (16.4%), Andalusia (15.8%) and Madrid (11.6%). The report also includes the number of eviction applications received by notification and seizure service units, however, the figures only ‘allow to track the change but they do not represent absolute values‘. Moreover, the fact that the application was sent does not mean the eviction has been carried out.

On this basis, the number of applications to evict someone registered in the third quarter of 2014 was 13.342, down 6.1% from the same period last year. Of these, 8.851 were executed, up 23.1% from Q3 2013.

Mortgage Evictions Decline

On the other hand, the third quarter of 2014 saw 16.767 home seizures, meaning a 1.4% decrease from 2013. By regions, the biggest number of evictions was noted down in Andalusia, 3.783 lawsuits or 22.6% of Spain’s total. The community is followed by Catalonia, accounting for 18.3% of all, the Valencian Community for 15.5% and Madrid for 10%.

Looking closely at the year-over-year change, we see bumper rises in Extremadura (up 46.6%) and the Balearic Islands (up 45.2%), as well as in Aragon (up 31.3%), Murcia (21%) and Asturias (17%).

Claims for Unfair Firing Levelling Out to 2010 Figures

As per the report, lawsuits based on unlawful dissmissals showed 25.571 cases, down 18.3% from the last year. The number posts the lowest since the fourth quarter of 2010.

Madrid registered the highest unjustified dissmissal rates, 5.503 cases or 20% of the total. Next positioned Catalonia (17.1%), Andalusia (16%) and Valencia (10.2%).

Also, Bankruptcy Trails Go Down

Likewise, the statistics reveal that the number of insolvency processes run in the third quarter of 2014 was 1.843, down 21.6% from the same period a year earlier.

Moreover, 336 companies reached arrangements with creditors and 962 fell into a liquidation phase, meaning by 25.5% less than in Q3 2013.

When it comes to the Spanish regions, Madrid received most bankruptcy applications (376 or 20.4% of all), then Catalonia (19.3%), Andalusia (13.6%) and the Valencian Community (11.8%).

Moreover, there were 144.262 payment proceedings, jumping by 14.5% higher than in Q3 2013. Around 18.7% of them were registered in Andalusia, 16.8% in Catalonia, 15.9% in Madrid and 11.7% in the Valencian Community.

Original story: El Confidencial

Translation: AURA REE

Reyal Urbis Owes €458 Mn to the Treasury, Regional & Local Authorities

3/12/2014 – Expansion

Reyal Urbis owes €457.88 million to the Tax Office, several regions and city halls. This is a mere 11.5% part of the €3.98 billion total liability of the property manager.

Reyal Urbis went bankrupt in 2013 with €2.5 billion in the red. At that time, it disposed of a €1.47 billion worth of real estate available to pay the debt off. The company chaired by Rafael Santamaria repeatedly stated it was working on an agreement with creditors to be presented ‘in the nearest future’.

During recession, the asset valuation carried out at the moment of bankruptcy got outdated as it had not taken into consideration any transactions pending closing, nor the asset depreciation over time. Specifically, sales offloaded its balance by €232.10 million and the value loss took away another €689.62 million.

Current debt of Reyal is mostly made up of ‘fees for issuing certificates by corresponding administrative bodies’.

In the first nine months of the ongoing year, the company lost net €483.6 million which adds 35% to its 2013 ‘red’. The loss was driven up by provisions and increased accrued liability caused by interests.

 

Original article: Expansión

Translation: AURA REE

Get Ready For Flat Prices & More Building Sites

1/12/2014 – Cinco Dias

In this last month of 2014, the real estate sector of Spain already notes that this year has been much better than the previous one. All the evidence is that this was the last annus horribilis for Spanish housing, at least for the moment. Both prices and development activity suffered abrupt drop-offs, reflected in, for instance, data showing that from more than 860.000 dwellings started in 2006, only 34.200 were finished till 2013. Secondly, prices have contracted by 30.7% on average since the 2007/2008 peaks, official statistics point out.

And this is the average as in some municipalities depreciation reaches 50%. A slight improvement in employment and recent return of lending seem to be the key factors for ‘the sector’s stability‘. It is predicted that prices will go down ahead but not as sharply as they used to. Moreover, experts await more cranes in desirable areas where ‘reasonably priced’ homes would be welcomed. In spite all these positive signs, specialists agree Spanish housing won’t come back to mid-2000 levels… will it?

The Prices

Over the past months, various statistical sources were repeatedly reporting seemingly contradictory data. Some said houses cheapened, while others claimed there have been first rebounds in prices, first in  month-on-month and then in year-on-year comparisons.

However, all contained a grain of truth. The catch is that each of them employs different periodical information. The calculations coming from the notaries are not equivalent to studies from the registrars (who base on deal figures from 2-3 previous months). Similarly, pricing reports using appraisal data are not comparable to a real-market study involving visits to new building sites.

The proof that all of them are reliable is that all conclude pointing at the same trend, also showing that the free-market laws apply. Thus, they coincide in showing an increase in sales, earlier stock absorption, a slowdown in pricing slump and reapearance of cranes in new property developments.

The Wealth Effect

Let it be the Ministry of Public Works’ data or the Appraisal Association’s, two sources which have been providing reports on Spanish housing for at least the last 20 years, average accumulative decrease of house values in the country posts 30%, meaning the same level as in 2004. As Maria Romero from Analistas Financieros Internacionales (AFI) says, the figures mean a negative equity for those households which acquired a dwelling ever since.

Still, statistics also show that in some geographical areas prices started to rise. Will the trend expand? ‘High unemployment rates and insufficient income especially affect the first-home buyers, as well as prospective demand. In any case, we do not expect any additional, deep adjustments’, claims Mrs Romero. Experts from Sociedad de Tasación portend the prices will continue to go down until finding what they call ‘the balance point similar to end-2000’.

The Stock

At the beginning of this new cycle, prices and sales in in-demand areas level out, whereas in the zones where product is in excess, prices are being squeezed down and new development seems impossible in there.

The increase in transactions contributes to faster absorption of new homes for sale which shrank by one-third since the 2010 peak (700.000 units).

The New Property Development

At the moment, large cities’ centers, excellently located neighbourhoods and those with good infrastructure were the first to see return of house construction. They are very carefully selected projects with 100% sales guaranteed and attractive prices. It is demonstrated by the fact that building permits bounced back in September for the sixth consecutive month (up 31.6% year-on-year).

Logically, developers strike areas of high demand and income per capita which proves better financial ability of the buyers.

Experts forecast further rise in building permits’ number in the next months, triggering a phenomena unseen since the recession began – more homes will be started than finished. In fact, works completion certificates keep steering down (by 35.6% annually in the third quarter). To compare, last year only 4% was started of what was constructed throughout 2006.

The Financing

Like individuals, developers also started to receive the ‘approved’ seal on their loan applications. Thus, as the Bank of Spain reported, not only mortgage lending to eligible customers is returning but also loans to developers become more and more common.

What is more, value added to investment in housing again increased quarter-on-quarter by 1.3% in Q3.

Recent studies reveal that in all European countries where homes regained value also the GDP grew up. That means that better conjuncture is vital for housing sales to confirm a recovery, which in turn feeds up economical well-being: from more real estate transactions, through related industries (decoration, repairs, etc.), vivid activity, more jobs, increased confidence, and here we go again, more housing sales.

 

Original article: Cinco Días (by Raquel Díaz Guijarro)

Translation: AURA REE

Martinsa’s One Foot In Liquidation

25/11/2014 – Cinco Dias

Property management company Martinsa Fadesa, the face of the real estate bubble which fell into insolvency in summer 2008, is closer and closer to being liquidated, once its new debt restructuring plan was rejected by creditors.

In March 2011, court extended a €7.2 billion payment obligation of Martinsa Fadesa for further 10-years. Officially, it was no bankrupt anymore. At the same time, the real estate firm promised to pay-off at least €3.2 billion owed to twelve entities but it failed to keep the word. Since last year, the 1% of that quote awaits amortization, i.e. €32 million.

Apart from the aforementioned amount, Martinsa Fadesa was supposed to face a 12.5% part of its total debt, €384 million, and sources from the sector hum it will be unable to repay that under no circumstances.

They also suggest the company could dodge the miserable end if it amortized the €32 million. However, it will probably be not able to do that either.

In the last effort to stay afloat, Martinsa went on talks with creditors on covenant change and asset give-in (mostly land), in exchange for debt write-off but the lenders said ‘no’ as it was incompatible with current legistlation.

Few days ago, taking advantage of amendments in insolvency regulations, the firm pursued its new plan called ‘Project Aurora 2’ which would allow it to trim the high indebtness by around €450 million. What is most surprising, the property company wants to keep most of its assets which are jointly valued at €1.4 billion.

In opinion of Martinsa’s main creditors, the proposal is ‘unacceptable’ and ‘inexplicable’ as it suggests the banks shall write-off 80% of the owed amount, take away assets worth a mere 19.5% part of the total, and assume that they will receive the remaining 0.5% within next eight or nine months.

Given such a development, sources close to the entities (i.e. CaixaBank, Banco Popular, Abanca -former Novagalicia-, Morgan Stanley, Royal Bank of Scotland, Sabadell, Unicaja, Liberbank, BBVA, CEISS -Caja España-Duero-, Kutxabank, Bankia and Sareb) say liquidation of Martinsa Fadesa may be an option, unless it presents a better offer.

 

Original article: Cinco Días

Translation: AURA REE

Deutsche Bank Purchases Europe’s Largest NPL Portfolio From BBVA

24/11/2014 – Expansion

BBVA has just sealed the biggest non-performing portfolio deal recorded since the Spanish and the European recessions began.

Namely, the bank chaired by Francisco Gonzalez has transferred a €1.7 billion worth of delinquent loans to Deutsche Bank. Due to the portfolio being 100% provisioned, BBVA might have reaped up to €50 million in capital gains.  Both entities refused to comment on the matter.

This sale represents one of the multiple operations carried out by Spanish banks striving at shedding unproductive assets and focusing on their core business.

Advised by N+1, Project Saturn included 8-years overdue loans which BBVA classified as unrecoverable. The portfolio is made up of personal loans without real estate collaterals and linked to consumption and credit cards.

Over 15 funds asked about the operation, like U.S. Perry Capital, Savia Asset Management, Malasian Aiqon or Norwegian Lindorff, to name few most famous.

Year-to-date, the biggest NPL portfolio sales sealed during the crisis amounted to €1.2 bilion and €1.5 billion, carried out by CatalunyaBanc, Bankia and BMN.

The New Player

This is the first distressed loan purchase in Spain by Deutsche Bank’s London-based independent affiliate specialized in this kind of assets. Deutsche Bank has been eyeing the Spanish debt collection market for months, with no successful acquisitions though.

The German entity is principally interesed in the return the portfolio may produce. After having obtained a 97-98% discount on ‘Saturn’, the bank expects to recover more than a double of that. Instead of creating its own agency, Deutsche Bank will outsource the loan management to Spanish firm TDX Indigo.

Apart from this distressed debt portfolio, the entity bought two real estate-backed credit packages from Sareb (Spain’s bad bank) last year. Altogether, they were a worth of €300 million and had commercial properties in Madrid and Barcelona as collaterals.

In the last months, the German bank has taken part in a bidding for the Spanish-property secured portfolio of Eurohypo and, competing with Oaktree, Pimco, Marathon and Finsolutia it vied for the troublesome loans of Catalunya Banc. In both processes Deutsche Bank offered the second-best bid.

BBVA prepares a sale of its collection agency scheduled at the beginning of 2015.

 

Original article: Expansión (by Jorge Zuloaga)

Translation: AURA REE

BBVA Refinanced €5 Bn in Credits More Than Twice

19/11/2014 – Expansion

The value of loans that BBVA refinanced more than two times amounted to around €5 billion at the end of 2013, the entity reported to the National Stock Exchange Commission (or the CNMV).

The bank chaired by Francisco Gonzalez (pictured) established a two-time limit for every 24 months of the loan’s life in case when clients apply for refinancing. Specifically, BBVA classifies most of the refinanced-more-than-twice credits as ‘doubtful for subjective reasons’ if they are outstanding or ‘doubtful for arrears’ if they are defaulting.

Total refinancing of the group showed almost €30.92 billion as per 31th December 2013, a 6.7% increase from the same day a year earlier. Having in mind the forecasts, total net refinancing reached €23.99 billion. Thus, debt refinancing and restructuring by BBVA accounted for 7.4% over the clients’ credit balance, substracting off the provisions which rose from €4.16 billion to €6.92 billion.

As the asset reclassification imposed by the Bank of Spain aiming at standardising portfolios showed, the entity led by Mr. Gonzalez has got refinancing records categorized as ‘doubtful risk’ totalling at €14.83 billion (end of 2013), by 72% more from 2012. Also, the process resulted in giving BBVA the ‘substandard’ label for its €8.42 billion balance in 2012. The amount shrank to €6.43 billion in 2013. Finally, refinancing of the ‘normal’ type of loans decreased from 11.95 billion to €9.66 billion.

 

Original article: Expansión 

Translation: AURA REE