Tag: debt repayment

Árima to Increase its Capital by €50M to Repay Debt & Purchase Assets

2 April 2019 – Expansión

The Socimi Árima, led by Luis Alfonso López de Herrera-Oria (pictured below), is going to carry out a capital increase of up to €50 million (expandable upon demand), which will be used to early repay a €30 million loan signed with CaixaBank, as well as to purchase new assets.

The company hopes to incorporate new investors through this operation, which will see its share capital increase by 50%, whereby providing more liquidity for its equity.

The capital increase will comprise the issue and launch into circulation of 5 million new ordinary shares with a nominal value of €10 each, which will be issued without an issue premium. It will be carried out through an accelerated placement aimed at qualifying and institutional investors.

The company’s asset portfolio amounts to €121 million, spans a gross leasable area of 29,000 m2 and includes more than 460 parking spaces in the office sector in Madrid.

Original story: Expansión 

Translation/Summary: Carmel Drake

Ibero CM Grants First Alternative Loan (€35M) To Local Property Developer

6 July 2018 – El Confidencial

Ibero Capital Management, the management firm launched by Walter de Luna and Luis Moreno, both former directors of Sareb and Acciona Inmobiliaria, has just closed the first major alternative financing operation in Spain, for an amount exceeding €35 million, which involves funding to purchase land, repay bank debt and build the project.

Of those €35 million, two thirds will be allocated to the land purchase and to repaying debt, whilst one third – approximately €10 million – will be used for the construction of the project.

The beneficiary is a local property developer in Málaga, which, thanks to this liquidity has been able to acquire three plots located in the Málagan town of Mijas, together with a golf course. It plans to build 145 homes on the land. The plots are not only finalist, the urban planning permissions to be able to start the building work are also very advanced, given that the marketing of the homes will begin immediately, according to explanations provided by Walter de Luna and Luis Moreno, speaking to El Confidencial.

The Ibero CM platform was created by the two directors to facilitate access to alternative financing for property developers and cooperative managers who want to buy land and are unable to obtain bank financing. They have €400 million available to finance developments all over Spain. The money comes from Oak Hill Advisors, one of the largest investment funds in the world, with more than USD 30 billion under management, which has invested more than €1 billion in Spain since 2005, primarily in real estate projects.

Ibero CM has closed this operation in record time, almost two months after announcing its own launch. It currently has several other projects in the pipeline amounting to approximately €100 million, which it hopes to close over the coming weeks and months.

This is the first firm of its kind to be launched in Spain, financing both the capital and debt of property development companies in every phase of the development of their products, including land purchases.

“The financing structure is very flexible since it includes several tranches that finance the acquisition of land, the repayment of bank debt, the payment of taxes and other expenses associated with the transaction and construction of projects (…)”, explain Walter de Luna and Luis Moreno.

“By staying (involved in projects) to the end and sharing in the profits, the financing costs decrease significantly”. And they add that “by sharing in the final profits of the project, the interest rates are not as high as if they were only financing land purchases. And there is not a fixed percentage, given that it depends on the total cost of the constructions that we finance. The greater the cost, the higher the percentage”, say the directors.

For now, Ibero Capital is focusing on finalist land and plots in a very advanced phase of urban planning, and they are centring on the major markets in Levante, Andalucía and Madrid, although they acknowledge that the Madrilenian market “is very expensive and, although we are only looking at the moment, obviously, if we decide to enter, the property developer margin would narrow”. Specifically, the manager is holding conversations with a cooperative manager to finance a project in Madrid. Similarly, they are open to both first and second home projects, whenever the projects are viable.

Unlike the investment funds that have acquired stakes in property developers in recent years, they do not get involved in the management of the companies that they finance. “We are not shareholders in the companies’ share capital, therefore we do not interfere in their decision-making or in their management. We carry out the same controls that any bank would when granting a property developer loan”, they conclude.

Original story: El Confidencial (by E. Sanz)

Translation: Carmel Drake

Sareb Recognises €2,044M Provision For Clean Up Losses

1 April 2016 – El Día

Sareb has recognised a provision amounting to €2,044 million after applying the Bank of Spain’s new accounting circular, which has resulted in losses amounting to €3,012 million on its loan portfolio.

According to sources at the so-called ‘bad bank’, the company will finance this initiative by converting €2,171 million of its own subordinated debt (into equity), which means that it will not require any additional capital. The company already made provisions amounting to €968 million in 2013 and 2014.

As a result of the tax impact of the clean up, Sareb closed the financial year 2015 with a net profit of €330,000.

The new accounting framework, which has forced the company to value all of its assets on an individual and frequent basis, also establishes the requirement to apply the impact of the clean up retrospectively and to reformulate its accounts for the previous year.

In this way, almost 90% of the provisions have fallen during the first two years of the company’s life, i.e. in 2013 and 2014.

During its three years of operation, Sareb has reduced the perimeter of its portfolio by around 15%, has generated total revenues of €12,801 million and has repaid €7,300 million of the debt that it issued to acquire the assets in the first place, which amounted to €50,781 million initially. In 2015 alone, Sareb repaid €2,051 million, said the entity in a statement.

At the commercial level, in 2015, the entity put 35,250 properties on the market and managed almost 28,000 proposals with property developers who hold debt with the company and are mostly SMEs.

The business in 2015

The financial year 2015 was defined, from an operational point of view, by the entry into operation of the four servicers to which Sareb entrusted the management of its assets at the end of 2014: Altamira Asset Management, Haya Real Estate, Servihabitat and Solvia.

During the year, a complex technological migration process was completed between the former originating entities and the four new partners, which resulted in the transfer of 4 million documents and more than 350,000 keys, linked to 105,000 properties, 80,000 loans and 375,000 guarantees.

As expected, the gradual migration process led to a temporary slow down in the rate of property sales compared with the previous year. As such, the company’s total turnover decreased by 26% to €3,886 million. (…).

For the Chairman of Sareb, Jaime Echegoyen, “in 2015, the company had to deal with the combined effect of the change in the accounting framework and the complex and laborious asset migration process. Both circumstances impacted our income statement and forced us to refocus our strategy for approaching the market over the next few years. The new regulations demand greater efforts in terms of capital management, margins and provisions relating to divestments”.

Original story: El Día

Translation: Carmel Drake

Carlos Slim On Verge Of FCC Takeover

13 January 2016 – Expansión

The conditions that Esther Koplowitz and Carlos Slim, the majority shareholders of FCC, agreed on 27 November 2014, to facilitate a €1,000 million capital increase and the refinancing of the business woman’s personal debt, may now become an obstacle that stands in the way of allowing the Mexican investor to guarantee the construction company’s latest capital increase, amounting to €709 million.

Slim has committed to subscribing for all of the new shares (totalling €118.2 million at €6 per share) that are not placed during the preferential subscription period. This guarantee exposes him to the possibility of exceeding the threshold of holding a 30% stake in FCC, which would force him to launch a takeover for 100% of the company.

However, the terms of the shareholder agreement signed with Koplowitz in 2014 prohibits the Mexican investor from exceeding the 30% threshold until the end of 2018. The agreement, which was submitted to the CNMV on 27 November 2014, clearly states that, “the parties agree to not increase their individual stakes in FCC above 29.99% of the share capital (that carry voting rights) for the duration of the lock-up period (four years)”.

Sources close to the company say that the most likely course of action is that both shareholders will agree to modify the shareholders’ agreement to lift or ease the limits to allow an increase in their (permitted) stakes, above all, given that, in less than a month, Slim has increased his shareholding from 25.6% to 27.2%. “He is marking the field of play and launching a clear message to the market ahead of the upcoming capital increase”, say the sources.

Slim is already exposed to an identical situation in Realia, in which he now holds a stake of more than 30% following a €89 million capital increase. He is currently waiting for the CNMV to release him of the obligation to launch a takeover.

Even if the waiver for Realia is accepted by the CNMV, it would not apply in the case of FCC, given that Slim is the majority shareholder and none of the other shareholders in the company have a stake of more than 30%. At market prices, the formulation of a takeover of 100% of FCC may cost Slim around €850 million, if he exceeds the threshold of 30% (excluding the 22.4% stake held by the Kolpowitz family).

Yesterday, trading on the stock exchange closed with a share price of €6.89 for FCC, i.e. 15% above the price set for the capital increase (€6/share). FCC’s €709 million capital increase is the latest measure adopted by Slim to complete the restructuring of his stake. The construction company wants to use the funds to repay some tranche B debt amounting to €450 million. It pays interest of 5% on the loan and it determines the group’s investment policy and shareholder remuneration.

In exchange for this repayment, the creditors must agree to commit to applying a discount of at least 15%. This is the same discount that was applied to the previous restructuring in which FCC refinanced debt worth €4,512 million.

Original story: Expansión (by C.Morán)

Translation: Carmel Drake

Realia Completes €89M Capital Increase

8 January 2016 – Expansión

Realia has successfully completed an €89 million capital increase to finance a debt repayment, which falls due on 29 January 2016. Carlos Slim, the controlling shareholder of the real estate company, took ownership of the shares that were left over following the conclusion of the preferential subscription period.

Specifically, Slim acquired shares in the capital increase corresponding to his 25.1% stake in Realia, which at the price set for the operation (€0.58 per share) resulted in an investment of €22.32 million. Moreover, the Mexican tycoon bought another 430,365 shares, which were left over following the conclusion of the preferential subscription period, which involved the investment of a further €250,000. FCC, the majority shareholder of Realia, with a 36.8% stake, also subscribed to its corresponding proportion of the capital increase.

Original story: Expansión

Translation: Carmel Drake

Sareb Unlikely to Acheive Any Of Its Goals For First 5 Years

29 December 2015 – Economía Digital

Sareb, the bank that was formerly chaired by Belén Romana and which, following her resignation, is now led by Jaime Echegoyen (pictured above, centre), is about to close its third year of activity. And it is doing so with a great deal of uncertainty over whether it will be able to fulfil the four main objectives it set itself in 2012.

Those objectives were: to reduce its balance sheet by 44% by December 2017; to repay 49.9% of its €50,781 million ordinary debt by that date; to have sold 45,000 homes, also by that date; and to guarantee shareholder returns of between 13% and 14%.

Unrealistic goals

The majority of its shareholders, even initially, did not expect to receive such high returns. But it seems like the other objectives are not going to be easy to acheive either, above all the main one: to repay €25,000 million of its debt within the next two years, half of which it paid out to acquire its 197,500 assets (more than 107,000 real estate assets and almost 91,000 financial assets).

Despite the work performed over the last three years, and having repaid €8,500 million of the €50,781 million that it must return to the savings banks that transferred those assets, it is a long way from achieving the objective set out for the company’s first five years of operation. To repay half of its ordinary debt between 2016 and 2017, it must fork out around €16,000 million.

Untenable position with increasing interest rates

And all of this is happening in an enviable situation in terms of interest rates, which meant that Sareb was able to reduce its financing costs, by lowering the spread on the renewal of its bonds, at the end of the first half of the year and will do so again at the end of 2015. In the event of an increase in interest rates, which will happen, sooner or later, the situation will automatically worsen.

The first step that Sareb must take to be able to repay half of its debt by the end of 2017 involves reducing its balance sheet by 44%. So far, as at June 2015, it had reduced its assets by just 14%. And then only thanks to the good performance of the financial assets, which decreased by more than €7,000 million, given that, by contrast, the value of its real estate assets has barely changed from the initial balance of €11,357 million.

Minimal reduction in assets

That lack of variation in terms of the value of its real estate assets is due to the fact that the sales that have been made fall well short of the 45,000 house sales forecast between 2013 and 2017, and because the foreclosure of property developer mortgages have ended up increasing the number of properties on the bad bank’s balance sheet.

At the end of 2015, Sareb still owns more than 90,000 of the 107,000 real estate assets that were transferred to it when it was first created, in February 2013, despite numerous campaigns launched in December by both the bad bank and by the servicers entrusted with the sale of these assets.

New accounting circular

And as if that were not enough, the Bank of Spain published a new accounting circular earlier this year. It was both expected and feared by Sareb, and it obliges the bad bank to individually value its assets at market prices, compared with the criteria used when they were transferred, which involved average discounts by asset type.

In theory, the accounting impact of the measure is not expected to alter the revenues streams and, if, as expected, new provisions are required, then they will be drawn from the conversion into capital of the amounts required from the €3,600 million subordinated debt in issue and subscribed to by around thirty investors. Those investors include the State, through the FROB, which is the main shareholder, with €1,652 million, followed by all of the main banks, with the exception of BBVA.

Original story: Economía Digital (by Juan Carlos Martínez)

Translation: Carmel Drake

Quabit Repays 27% (€90M) Of Its Debt Balance

22 December 2015 – Efe

According to a statement issued by Quabit, its recent €45 million capital increase has allowed the company to repay its €35.6 million debt to Sareb early.

This payment to Sareb has also resulted in the release of assets with significant short-term development potential, where Quabit plans to build around 1,000 homes.

In parallel, under the framework of the refinancing agreement it signed with financial institutions in March 2014, the real estate company has made “daciones de pago” of land.

As a result of the two operations, Quabit has decreased its debt by €90 million in total, which represents a reduction of 27% with respect to its debt balance as at 30 September 2015.

In this way, the company is beginning to fulfil the objectives of its business plan for the period 2015-2020, which according to Quabit, focuses on the promotion and development of its own portfolio of assets, as well as new investments.

Original story: Efe

Translation: Carmel Drake

Sareb Owns One Third Of Spain’s Problem Banking Assets

17 September 2015 – Expansión

Sareb is playing a key role in the clean up of Spain’s financial sector. According to a study conducted by the consultancy RR de Acuña y Asociados, proof of that is the fact that it now owns one third of the sector’s problem assets.

The firm calculates that the Spanish banking system’s exposure to problem real estate assets amounts to €259,049 million in gross terms, plus a further €32,337 million in doubtful mortgage debt.

According to the study, which is based on the latest available figures, Sareb has loans and real estate assets worth €44,263 million, which in gross terms – before they were transferred – would have been worth €94,750 million.

RR de Acuña y Asociados also highlights that the transfer of assets from entities with public aid to Sareb meant that the first (entities) recorded extraordinary valuation adjustments of €12,700 million. The assets transferred by Bankia, Catalunya Banc, NCG Banco – now Abanca -, Banco de Valencia, BMN, Ceiss, Liberbank and Caja 3 had an initial appraisal value of €106,970 million. Excluding provisions, RR de Acuña y Asociados has identified a mismatch of €12,694 million between the transfer value to Sareb, which the entities must have borne themselves.

Forecast

Although the volume of problematic banking assets has stopped increasing over the last few years, the consultancy warns that it will take time for the entities to digest the leftover real estate assets: “Although the trend in the volume of doubtful assets is stable and is even recording some small downward variations, if we take into consideration the precarious financial situation of the property development and real estate construction companies, all indicators show that the level of exposed assets will continue to behave in the same way, for the next two years at least”, says the report. This means “a decrease in the volume of loans and an increase in the volume of real estate assets”.

As such, the real estate firm observes “an over-supply”, which means that it is “unlikely that house prices will begin to increase in the coming years”.

Meanwhile, yesterday, Sareb announced the repayment of a senior debt tranche amounting to €47.3 million after amending the asset transfer contract it holds with Catalunya Banc.

The asset transfer agreement between the two entities established that either of the parties could make adjustments to regulate the transfer completed in 2012, for a period of 36 months following its signing.

Original story: Expansión (by J.Z. and J.M.L.)

Translation: Carmel Drake

Merlin’s Acquisition Of Testa Moves Faster Than Expected

12 August 2015 – Cinco Días

The Socimi, Merlin Properties, now owns 77% of the real estate company Testa and has paid consideration of around €1,465 million to date.

The construction company, Sacyr, was not expected to cede this stake in its subsidiary until March 2016.

The process to sell Testa, the former subsidiary of Sacyr, is moving faster than expected. The deadlines have been accelerated as the construction company chaired by Manuel Manrique has overcome various obstacles in order to generate some cash from the transaction. The restructuring of the debt and the release of the pledge over the shares in the real estate company linked to its stake in Repsol, have allowed Merlin Properties to take ownership of an additional 26.9% stake in the real estate company today for around €375 million, according to banking sources. By the end of the day, the Socimi will control 77% of the company.

On 9 June, Merlin announced its purchase of Testa for €1,793 million. The operation was designed to be completed in several stages. During stage one, the Socimi, which boasts Ismael Clemente as its CEO, acquired 25% of the real estate company. The remaining shares were pending the release of a pledge over the shares linked to Sacyr’s debt. This was because when the construction company restructured its €2,272 million liability, it pledged its 9% stake in Repsol (amongst other assets) as a guarantee. On 23 July, Merlin paid €861 million for a 25.1% stake in Testa. Sacyr was forced to allocate €600 million of the consideration received at the time, to paying off its debt with creditor banks. In turn, the Socimi took ownership of the majority of the shares as a result of its disbursement.

As such, Sacyr was able to return to renegotiate its debt and reduce the percentage of Testa’s shares secured by its shareholding in Repsol. As such, the construction company has now been able to accelerate the sales process of the next package (of shares) to be acquired by Merlin – this change in control was not originally scheduled to take place until March 2016. The same sources state that the consideration (€375 million) that the Socimi will disburse today will go straight into Sacyr’s coffers, with no obligation to reduce its liabilities, and may be allocated to its operational needs. The remaining shares in Testa continue to be pledged by the shareholding in Repsol.

In total, Merlin has now paid around €1,465 million for the three share packages in a period of just two months.

In terms of the remaining 23% stake, the sales period is due to close on 30 June 2016. Merlin’s ultimate objective is to turn Testa into a Socimi and subsequently merge with it. Based on the information provided, the transaction will give rise to the largest real estate company in Spain, with assets worth around €5,500 million, including the Torre PwC, one of the four skyscrapers in the Norte Castellana business district in Madrid. According to the purchaser, these buildings, which are primarily leased as offices, will generate gross annual revenues of approximately €290 million.

In addition, Clemente said last month that Merlin will sell off Testa’s residential and hotel portfolio, which represents around 15% of its total portfolio.

Original story: Cinco Días (by Alfonso Simón Ruiz)

Translation: Carmel Drake

Uro Property To Issue Bonds To Secure €1,300M Funding

27 April 2015 – El Confidencial

The Socimi has launched its road show to issue 25-year debt that will allow it to repay all of its banking loans. The placement will be conducted in Holland through a special vehicle.

Uro Property has stepped on the accelerator to adjust its financial structure and position itself so as to compete head to head with the major Socimis in the market. Following its sale of 381 Banco Santander branches to AXA Real Estate (last month), the company chaired by Carlos Martínez Campos and led by Simon Blaxland, has launched a bond issue with a view to securing funds amounting to €1,300 million.

Through this placement, the Socimi wants to refinance all of its bank debt, which amounted to €1,424 million before the transaction with AXA, but which will be reduced by the corresponding proportion following the sale to the French group, since all of the funds (raised from the sale) will be used to repay its financial commitments.

This will be the first major bond transaction carried out by a Spanish Socimi. It forms part of the general move by these companies to return to the stock markets in search of liquidity and whereby take advantage of the window of opportunity that has opened up in stock markets around the world.

Holland is the market chosen by Uro to conduct its bond issue, which will be undertaken through the ad hoc creation of a special vehicle to issue the debt. Uro will verify investors’ appetite during the international road show, which the company has now launched; its objective is to reduce its current spread by 200-300 basis points and adjust the lifespan of the issuing vehicle to reflect the average life of Santander’s rental assets, i.e. around 25 years, although there will also be shorter terms.

The agreement with AXA has proved to be a lifeline for the Socimi, since it has resulted in the materialisation of the asset values assigned by CBRE. When Uro first listed on the MAB on 12 March, the real estate consultancy firm valued the company’s total portfolio at €2,000 million. Less than two months later, the French group, which owns one of the largest real estate investment vehicles in Europe, has paid 10% whereby giving credibility to Uro’s core assets.

Following the transaction with AXA, Uro now owns 755 Banco Santander branches, which have a combined surface area of more than 340,000 square metres and are valued at more than €1,700 million. Moreover, the branches that Uro has retained are the most desirable (prime) and are mainly located in Madrid and Barcelona, which explains why, despite having sold around one third of its assets (in terms of the number of branches), in terms of value, the sale only represents 15%.

Next steps

With all eyes on the closure of the (bond) issue in May, Uro is working on its road map, with a view to freeing up all of its bank loans and therefore, being able to address the company’s next objective, namely its listing on the stock exchange next year.

The Socimi’s major shareholder is Santander, which holds 24% of Uro’s share capital, whilst CaixaBank holds 14.98%, BNP Paribas owns 8.81% and Societe Generale holds 3.14%. Moreover, several hedge funds and entities such as Barclays and Bayerische Landesbank hold smaller stakes, of less than 1%, whilst the company’s former shareholders, Sun Capital, which is now known as Atisha Holding, and the Pearl Group, now Phoenix Life, hold 21.7% and 14.38%, respectively.

All of these shareholders have committed to continue to hold the Socimi’s share capital, for the next 12 months at least, although it is possible that, if an agreement is made between the shareholders, this period, known as the lock-up, may decrease if the circumstances in the market dictate that a move to obtain liquidity should be launched before the planned schedule, to pave the way for the stock market listing.

Uro’s IPO on the MAB was carried out to comply with the rules established for Socimis, which requires them to become listed vehicles within a maximum period of two years. Although Santander’s landlord still had time before the end of that term, it decided to list in March precisely because it wanted to pave the way for its bond issue, since investors always look more favourably upon debt issued by listed vehicles.

Nevertheless, since that was not its natural market and since at the time, it regarded the step more as a requirement than a vocation, it limited its placement on the Alternative Investment Market to the minimum legal requirement of €2 million. In contrast, once it has finished adjusting its financial structure and is able to begin actively working on its stock exchange listing, the company will have the opportunity to raise capital, which it will use to finance purchases, like other Socimis have done, given that all of the funds raised from its current bond issue will be used to repay its debt.

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake