Martinsa Heads For Liquidation With A €4,603m Deficit

2 March 2015 – Cinco Días

The real estate company halved its losses in 2014 (to €313 million) but that was still not enough to plug the hole

Martinsa Fadesa recorded an ‘equity shortfall’ of €4,603 million at the end of 2014, according to the annual results presented by the real estate company, which was plunged into liquidation last Thursday after it failed to obtain support from the banks for its latest proposed debt repayment plan.

The real estate company, which is owned and chaired by Fernando Martín, holds assets valued at €2,392 million to meet total liabilities of €6,995 million, of which €3,200 million corresponds to debt with financial entities.

Martinsa closed 2014 with a net loss of €313.6 million, an amount that represents a 51.9% reduction in the losses recorded one year earlier.

The decrease in the loss resulted from a reduction in the provisions made by the company against the impairment of its real estate assets, which amounted to just €179 million in 2014, i.e. 60% of the amounted provisioned in the previous year.

Nevertheless, the accounts of the real estate company in 2014 included €131 million of financial costs relating to bankruptcy debt, which corresponded to the bankruptcy process that the company was involved in between 2008 and 2011, the largest ever bankruptcy filed in Spain’s history.

The company’s lack of liquidity to meet the debt repayment schedule established as part of the agreement that was made in March 2011 to allow the company to emerge from bankruptcy, forced the company to begin negotiations with the banks at the end of 2013.

In December 2014, when a new debt payment fell due and given that it was impossible for the company to reach an agreement with the banks, Martinsa submitted a proposal to the court to unilaterally reform the 2011 agreement.

The judge gave the banks until 26 February to state their views regarding the plan, but the company failed to obtain backing from 75% of the creditors (the required threshold) before the deadline expired, according to sources close to the process.

The company will hold an extraordinary Board Meeting today (Monday 2 March 2015) to analyse its own request for liquidation.

House sales

Martinsa Fadesa faces liquidation despite the fact it managed to increase its turnover by 18.3% in 2014, to €130 million, according to the accounts it has submitted to the National Securities Market Commission (Comisión Nacional del Mercado de Valores or CNMV).

It generated this turnover through the delivery of 1,585 homes in 2014, more than double the number handed over in 2013, of which 482 were registered in Spain and 1,103 overseas.

Besides Spain, Martinsa Fadesa undertakes activity in France, Morocco, Mexico, Romania, Poland, the Czech Republic and Bulgaria, although its operations in the latter are also in liquidation.

All of the homes that were pre-sold by the real estate company in 2014 correspond to this international activity.

Original story: Cinco Días

Translation: Carmel Drake

Martinsa Loses Battle With Jove & Fails To Convince Its Banks

12 February 2015 – Expansión

No options left / The Supreme Court dismisses the appeal lodged by the real estate company, which is also failing to reach an agreement with its creditors

The real estate company Martinsa Fadesa received a slap in the face yesterday as the Supreme Court rejected its latest appeal in the legal battle against Fadesa’s former managers, Antonio de la Morena and Manuel Jove.

The Supreme Court was the last legal option for Fernando Martín (pictured above) in his attempt to get Jove and De la Morena to compensate Martinsa with €1,576 million for allegedly falsifying Fadesa’s valuations prior to its purchase by Martinsa in 2007.

Following the rulings against the plaintiff by the Commercial Court, the Provincial Court of La Coruña and now the Supreme Court, the real estate company is left without any legal options. It could request the referral of the case to the Constitutional Court, but that is something that judicial sources deem unlikely.

This failure comes at a very delicate time for the real estate company, just a few days before the period for reaching a new agreement with its creditors comes to an end. In the proposal to its creditors, Martinsa (which has an equity deficit of €4,500 million) had included the possibility of cleaning up the company with the €1,576 million that it hoped to receive from Manuel Jove and share some of the money with its creditors. Now, the company will not only receive that amount, but the judge has order that it cover the legal costs of the trial, which lasted for almost four years. In total, Martina may be forced to pay more than €40 million as a result.

The creditors

In this context, the deadline imposed by the judge in La Coruña for the creditors of the real estate company to join the payment plan will expire on 26 February. The proposed plan includes a significant debt forgiveness clause (“quita”) for some of the more than €6,000 million that it owes.

In addition to sharing out the compensation expected from Jove, the proposal includes a number of other improvements, but they are not sufficient for the creditor banks, which have been trying to reach an agreement with Martín for months.

Amongst the discrepancies between Martinsa and its creditors is a mismatch of up to 70% regarding the valuation of assets. Faced with this situation, the entities, including Popular, CaixaBank, Abanca and Sareb, amongst others, will not sign up to the agreement and so the judge in charge of the case will have no choice but to initiate the company’s liquidation plan. This process will be “long and complex” due to the huge volumes of plots, with a variety of different uses and locations, and the fact that many of them are in very early stages of development.

Original story: Expansión (by R. Ruiz and S. Arancibia)

Translation: Carmel Drake