Sareb Still Faces Challenges Five Years After its Creation

27 February 2018 – Expansión

The bad bank was created with 200,000 toxic assets worth €50.8 billion, inherited from the rescued savings banks. In five years, it has divested 27% of that encumbrance. It has another ten years left to liquidate its remaining stock.

Just over five years ago, Sareb (…) was launched. The creation of the bad bank was made possible thanks to the participation of European funds in the bank rescue and the solidarity of the financial system, which had the capacity to resist the crisis and contribute its grain of sand to the process.

Sareb was created with private capital majority (contributed by the banks, with the exception of BBVA, which refused to participate, as well as insurance companies and a handful of real estate companies) and the remainder was provided by the State through the Frob, in such a way that any equity imbalances and losses that the new company would incur would not be accounted for in the public deficit (…).

The last five years have not exactly been a walk in the park for Sareb (…). Nevertheless, it has generated revenues from the sale of assets amounting to €12.9 billion, which have allowed it to cover its expenses, which, in addition to the cost of its 400 employees, involve: the payment of commissions to intermediary companies (€1.1 billion); the payment of interest (€4.0 billion (…)); taxes (€790 million (…)) and more than €400 million in maintenance costs and service charge payments.

The bad bank’s revenues proceed from the sale of its assets, whose composition has changed considerably since its creation. Currently, Sareb owns almost the same number of properties as it had at the beginning, but after having sold almost 65,000 assets. That is because some of the loans that were transferred to Sareb upon its creation have now been converted into properties through the execution of the guarantees that they secured. In this way, properties now account for 32% of the company’s total asset value, whilst the weight of loans has decreased from 80% to its current level of 68%. The entity’s assets have decreased by 27% to reach €36.9 billion and the debt issued by Sareb, which is guaranteed by the State, currently stands at €37.9 billion, down by 25%.

The company has generated positive margins during the course of its life, although it has only ever recorded losses. In 2016, the most recent period for which figures are available, its losses amounted to €663 million and, although its results for 2017 have not been published yet, the losses are expected to be similar. Reality has imposed itself on the initial business plans. Today, both the entity’s President, Jaime Echegoyen, and the company’s shareholders, understand that one possible objective would be for the entity to be liquidated within 10 years without having needed any new capital contributions and for some of the investment to be recovered, around 60%, with the remaining 40% having to be written off.

The President of Sareb understands that the company is fulfilling the basic purpose for which it was created, albeit with difficulties: the sale of damaged assets from the entities that received public aid, because, it does not have any other levers that would allow it to offset the possible losses that it would incur if it accelerated its sales.

Sareb only generates revenues from the sale of its assets and that is forcing it to adjust its sales prices a lot more so as not to incur losses. In this regard, it is totally different from the other financial institutions, for whom the damaged real estate assets account for only part of their balance sheets and, therefore, they can divest them at lower prices, since they receive other revenues that generate sufficient margins for them.

Original story: Expansión (by Salvador Arancibia)

Translation: Carmel Drake

The Monje Family Puts Assignia Construction Group Up For Sale

9 December 2016 – Expansión

The Monje Tuñón family, the controlling shareholder of Assignia Infrastructuras, has launched a feasibility plan to refinance the construction company’s debt and resolve the collapse of the group that has, amongst other consequences, resulted in the delayed payment of the last three months salaries to the workforce of 1,600 employees and which may force the company to suspend its payments it it fails to reach an agreement over the next few weeks.

The owner, which has stepped up talks with its financial creditors, is considering several measures to comply with the banks’ demands and access new lines of financing. In addition to the sale of several smaller assets, the Monje family has put the construction company up for sale, after identifying interest from several investment funds and two Asian industrial groups. The aim is that, with the entry of a new shareholder through a capital increase, the company’s balance sheet would be strengthened and an agreement would be facilitated with the banks to refinance a €60 million debt, which matures in December this year. (…).

The construction company forms part of the group of medium-sized companies in the sector, it is geographically diverse (with operations in 14 countries) and has several valuable assets, especially those granted under concession agreements. Assignia recorded turnover of €250 million in 2015, up by 12% compared with the previous year, and an EBITDA of €18 million. Its result was negative (-€4 million) due to its significant financial expenses, which amount to €12 million per year.

The group’s production portfolio currently amounts to around €700 million, but some of that amount is doubtful, given that Assignia, like all of the other companies in the sector has fallen victim to non-payments by debtors. (…).

As such, the company is preparing to implement an ERE redundancy plan in Spain, which will affect around 150 people, equivalent to almost 10% of its workforce. (…).

In the meantime, negotiations with the banks continue. The aim is that the banks will facilitate new maturity periods and open new lines of credit to ensure the continued operation of the company. Assignia’s financial debt is distributed between 10 banks through a syndicated loan that had to be renegotiated in March this year. Santander is the agent bank and Bankia is the entity with the highest exposure (around €20 million). CaixaBank and Sabadell, amongst others, also participate in the syndicate.

Original story: Expansión (by C. Morán)

Translation: Carmel Drake