Riu Hotels Wins a Small Victory Over Casanova in the Dispute Regarding Edificio España

1 March 2019 – El Español

A small victory (bringing the total to two) for Riu Hotels in the fight for ownership of the commercial space in Edificio España. The judge has dismissed the precautionary measures that the Baraka group, owned by the Murcian businessman Trinitario Casanova, requested to prevent the registration of the property in the name of the hotel group.

The magistrate has rejected the claim on the basis that there is no evidence, “in a clear and unequivocal way, of the relationship that must necessarily exist between what is claimed in the lawsuit and what is recorded in the Property Registry”. Specifically, Baraka requested that the inscription in the registry should include a note establishing the existence of a dispute over the ownership status.

The objective of that measure is to ensure that any possible investor in the commercial space knows that problems may arise in the future regarding the ownership. Nevertheless, the magistrate considers that the group owned by Trinitario Casanova has not proved its ownership of those spaces in the correct way.

Baraka is going to appeal

Specifically, and according to explanations provided by the group, there is a discrepancy between its lawyers and the judge because the lawsuit against the hotel firm was made directly by Baraka’s parent company, rather than by the company that the group used to purchase Edificio España (and which was subsequently transferred to its parent company ahead of the sale to Riu).

This is the second time that the courts have rejected Baraka’s requests, which in the opinion of Riu Hotels is good news. “We are continuing to work to open Hotel Riu Plaza España in the summer of 2019”, said the group in a statement to this newspaper.

The decision by the judge will be appealed by the Baraka group (…) and the Murcian group is convinced that it is in the right.

Original story: El Español (by Arturo Criado)

Translation: Carmel Drake

Baraka Triggers the Immediate Suspension of the Building Work at Edificio España

23 November 2018 – El Economista

The magistrate of the Court of First Instance nº 67 of Madrid has ruled that the building work on Edificio España in Madrid be suspended immediately due to the risk alleged by Baraka before that legal body.

Baraka, the company owned by the businessman Trinitario Casanova, filed a lawsuit before the courts of Madrid in August requesting the suspension of the building work on the hotel in Edificio España, in Madrid, which is now owned by the hotel chain Riu. The hotel firm purchased the iconic building in Plaza España from Baraka last year.

Baraka is claiming in the courts that the commercial premises inside the building, spanning 15,000 m2, belong to it and that Riu is refusing to sign across the deeds.

The hotel group Riu indicates that it has not yet received any notification to suspend its building work, according to sources speaking to El Economista. The hotel chain clarifies that Baraka does not have any contract with purchase rights or to register on public record the commercial space in Edificio España. Indeed, they note that at the time of Riu’s purchase of the building, Baraka signed “a non-representative mandate contract to search for investors for the commercial area, which it has failed to do”, despite repeated requests from the hotel chain.

The firm points out that a sales agreement has been reached with Corpfin Capital Real Estate for the commercial area, which was signed in September and which is on the verge of being executed. Riu is threatening to sue Baraka for damages and losses if the building work at Edificio España is affected. The hotel chain is going to invest between €380 million and €400 million in the project, including the purchase of the building (around €272 million) and its renovation.

The future hotel will be a four-star property and will have 589 rooms, 15 meeting rooms and almost 3,000 m2 for social and corporate events. The inauguration of the hotel is planned for September 2019 and the property will operate under the brand Riu Plaza.

Original story: El Economista (by Alba Brualla)

Translation: Carmel Drake

Bankia, BBVA & Abanca At War with Sareb for “Breach of Contract”

30 January 2018 – El Independiente

Bankia, BBVA and Abanca are at war with Sareb. The three entities are not willing to sacrifice their own results just because the bonds issued by the ‘bad bank’, which they received as payment for the real estate assets that they transferred to it, are now generating a negative return when, according to the conditions established, the coupon should not have been allowed to fall below 0%.

The conflict is in the middle of an arbitration process to determine whether the banks will be forced to accept that Sareb has decided to change the price of those bonds, explain sources familiar with the negotiations, speaking to El Independiente. The affected entities accuse “Sareb of a breach of contract”.

Sareb was created to take on 200,000 financial and real estate assets from the banks in exchange for which it issued €50.781 billion in 1-, 2- and 3-year bonds, which are renewed each time they mature. The interest rate on those bonds comprises two variable components: the 3-month euribor rate – which is currently trading at -0.32% – and the Treasury interest rate over the term in question. On the secondary market, that interest rate currently amounts to -0.43%, -0.21% and 0.03% for one, two and three years, respectively.

Of the €50.781 billion issued, Bankia granted the company assets worth €22.317 billion, Catalunya Bank – now absorbed by BBVA – contributed €6.708 billion and Novagalicia – which now belongs to the Venezuelan group Abanca – just over €5.0 billion.

Officially, the bonds were issued with a coupon that included a floor clause to prevent the interest rate from being negative depending on the conditions in the market. That floor had its own raison d’etre: so that the securities could be used by the entities to approach the ECB to request liquidity, given that, until last year, the bonds had to trade with positive coupons in order to be discounted by the central bank.

Nevertheless, a regulatory change in the middle of 2017 means that the banks can now use this debt as collateral even when those coupons are negative. This argument is enabling Sareb to refuse to maintain the floor clause that kept the coupons at 0%. And Bankia, BBVA and Abanca are not willing to assume that cost.

An executive familiar with the conflict explains it like this: “Sareb agreed that,  in exchange for the real estate assets that the banks transferred to it at the end of 2012, it would pay them a specific amount, not in cash but in bonds. Now it says that it is going to pay less and so, naturally, the banks need to defend their interests and those of their shareholders”.

Of the more than €50 billion in Sareb bonds issued to pay for the 200,000 real estate assets – 80% in loans and credits to property developers and 20% in properties – which nine entities transferred to it, the outstanding balance now amounts to €37.9 billion. In this way, the company has repaid almost €13 billion. Moreover, it has also paid interest on that debt of almost €2.8 billion.

Original story: El Independiente (by Ana Antón and Pablo García)

Translation: Carmel Drake

Large Funds Get Involved in Popular’s Criminal Lawsuit

31 January 2018 – Expansión

The large funds Pimco, Anchorage, Algebris and Cairn are participating in the criminal case that the Spanish High Court is investigating against the former directors of Popular.

These funds, which lost almost €850 million following the resolution of the bank, have appealed the resolution decision taken by the Single Resolution Board (JUR) before the European Court of Justice and the resolution of the Frob before the Spanish High Court. Specifically, Anchorage, Algebris and Ronit have appealed to the European Court of Justice and Pimco, Anchorage, Algebris, Ronit and Cairn have appealed to the Spanish High Court.

On 4 October 2017, judge Fernando Andreu admitted for processing the first lawsuits against the former directors of Popular and PwC. Most of them are focused on the capital increase made in 2016 and against Ángel Ron and his Board for improper management, falsification of documents and misappropriation. Lawsuits have also been filed against Emilio Saracho and the management of the most recent executive team.

The debtholders are being represented in Spain by Andersen Tax & Legal and SLJ Abogados and in the EU by Quinn Emanuel.

Richard East, Managing Partner at Quinn Emanuel, explains: “The plaintiffs filed serious accusations that the Spanish High Court has agreed to investigate. The funds want to be informed and to collaborate in this investigation to determine the existence of falsehoods in the process”.

Original story: Expansión (by Mercedes Serraller)

Translation: Carmel Drake

FCC Wins Legal Ruling Against Blackstone & Goldman Sachs

1 December 2016 – Expansión

A judge from the Commercial Court in Barcelona has dismissed the lawsuit filed by GSO, one of the funds owned by Blackstone, and by Goldman Sachs against the legal agreement approved for the refinancing of FCC‘s debt. As a result of the agreement, the construction company had managed to refinance a tranche of its debt (€1,350 million) at a significant discount (but GSO and Goldmans opposed the deal).

Although the refinancing was backed by 93% of FCC’s creditors, Blackstone and Goldman Sachs opposed the operation and appealed to the courts for damages caused amounting to around €295 million. The judge has now rejected their claim, which cannot be appealed to a higher court.

In January 2015, the Commercial Court of Barcelona validated the judicial approval, which allowed the Spanish construction company to apply a discount and reduce the cost of a tranche of its corporate debt amounting to €1,350 million.

The law firm Linklaters advised FCC in the financial restructuring process and has defended the interests of the construction group against the lawsuit filed by the funds. Uría also acted on behalf of the banks (Bankia, BBVA and CaixaBank), who participated in the lawsuit as a party affected by the appeal, whilst a lawyer from Jones Day defended the interests of GSO and Goldman Sachs.

93% of the banking syndicate accepted the new financing conditions, which basically involved accepting a discount of 15% through the repayment of debt amounting to €900 million using €765 million raised during the company’s most recent capital increase. The outstanding loan balance, around €450 million, is being repaid at (an interest rate of) 5%.

The opposing creditors included overseas investment funds such as Blackstone (GSO) and credit institutions such as Burlington and Ice Focus. The foreign banks included Goldmans, Barclays, Credit Suisse and Merrill Lynch, amongst others. GSO and Goldmans ended up taking the case to court, but the judge has ruled against them.

The claimants tried to link the lawsuit in Barcelona with an appeal in London where another group of FCC creditors has filed a case for the early repayment of their investment through the issue of convertible bonds amounting to €450 million because they considered that the Spanish company had breached one of the suspensive clauses of the contract relating to the non-payment of debt (default). Blackstone (through GSO Capital) was one of the London-based claimants. Given the legal protected afforded to bondholders in London, FCC was obliged to suspend the process to convert bonds amounting to €32.75 million.

In the ruling in Spain, the judge in Barcelona rejected the existence of a link between the resolution regarding the early execution of the bonds and the validity of the restructuring of FCC’s debt.

Original story: Expansión (by C. Morán and G. Trindade)

Translation: Carmel Drake

Bankia & Apollo Go To Court Re Sale Of Finanmadrid

3 October 2016 – Expansión

Both entities are waiting for the discrepancies that arose from the sale of Finanmadrid to be resolved. The sale was completed in 2013 for €1.6 million

Fracciona Financiera Holding, the subsidiary of Apollo, filed the first lawsuit, in which it claimed €8.5 million from Bankia due to discrepancies in the sale and purchase contract based on the determination of the sales price for Finanmadrid.

The contract included clauses that have an impact on the basis of the evolution of various parameters. These conditions have been common in multiple sales operations closed in the financial sector since the outbreak of the crisis. The asset protection schemes (EPA), which cover the buyers of former savings banks, are the most visible example of these types of operations.

Bankia has responded to the lawsuit filed by Apollo, with its own claim for €6.4 million.

Finanmadrid, which used to specialise in offering consumer credit through retailers and car dealerships, has now been integrated into Avant Tarjetas, a subsidiary of Evo Banco, controlled by Apollo. Previously, it was integrated into Fracciona Financiera Holding. In the company’s accounts from last year, the audit report explains that “in the opinion of the company’s legal advisors, an unfavourable outcome from the lawsuit (with Bankia) is remote, nevertheless, the shareholder (Apollo) would financially support any contingency that may arise in the event that no provision has been recognised”.

Before the integration, Finanmadrid reduced its share capital by €2.24 million to absorb losses and so it was left at €2.79 million.

Apollo’s claim against Bankia forms part of a broad range of claims against the entity chaired by José Ignacio Goirigolzarri. In total, the bank faces claims amounting to €390 million, not including the claims relating to its debut on the stock market and the sale of its preference shares.

Claims

The largest claim, amounting to €165 million, is one presented by ING Belgium, BBVA, Santander and Catalunya Banc against Bankia, ACS and Sacyr. (…).

The construction group Rayet also claims €78.2 million from Bankia for what it considers are accounting irregularities and for differences in the valuation of plots of land linked to the debut of Astroc on the stock market in 2006, an operation piloted by the former Caja Madrid.

The bank has 305 legal proceedings open relating to derivatives with claims amounting to €38.8 million.

Original story: Expansión (by E. del Pozo)

Translation: Carmel Drake

Jale Group Owner Acquitted Of Fraud In Incosol Case

27 July 2016 – Expansión

The former owners, the Basque García-Egocheaga family, had accused López Esteras of swindling them during his purchase of the prestigious medical-hotel complex.

The Provincial Court of Vizcaya has acquitted the businessman José Antonio López Esteras, founder of the Jale Group, of crimes involving fraud, continued fraud and concealment of assets, of which he was accused following the sale of Incosol, formerly one of the most prestigious medical-hotel complexes in Europe, located in Marbella.

In addition, his son José Antonio López Esteras Camacho and son-in-law, Alfred Fischbac, have also gone free. They are the former directors of the Cádiz-based holding company, which has now filed for liquidation but which was one of the largest companies in Andalucía in its hey-day, with real estate, construction and hotel businesses.

The case dates back to 2007, when Jale acquired Incosol from the Basque García-Egocheaga family – which also used to own the Hotel Los Monteros – for €50 million through a complex financial and corporate operation. Less than fourteen months later, they filed a lawsuit against the three executives mentioned above, asking for 24 years in prison and compensation amounting to €3.6 million on the basis that they had made payment guarantees and commitments assumed by the Andalucían group somehow disappear.

Those obligations were guaranteed through the constitution of a pledge over 100% of the shares in the company Hotel Monasterio San Miguel, S.A., whose main asset was the hotel of the same name – located in El Puerto de San María – one of the most reputable in Andalucía and the flagship of its hotel division.

Shortly thereafter, Jale filed for voluntary creditor bankruptcy, but before doing so, it reached an agreement with BBVA to transfer ownership of the property to the bank for €24 million, in a sale & leaseback operation.

The plaintiffs consider that, with this manoeuvre, the executives made “the guarantees that secured the fulfilment of its obligations disappear in a fraudulent way”.

Now, however, the Provincial Court of Vizcaya has acquitted them on the basis that “the evidence provided is not sufficient to conclude that the intention behind establishing the pledge over the shares of Hotel Monasterio was to deceive García Egocheaga, or hide from them the fact that the guarantee was going to disappear”.

In addition, the court said that the former owners of Incosol were offered other guarantees in real estate assets worth more than €30 million.

Original story: Expansión (by Simón Onrubia)

Translation: Carmel Drake

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

Martinsa Has Until Thursday To Convince Its Lender Banks

23 February 2015 – Expansión

Deadline for negotiations / The real estate company has debts of €3,500 million and must reach an agreement with its creditors to avoid liquidation.

Martinsa Fadesa has until Thursday 26 February for its banks to accept the new creditors’ agreement that the real estate company submitted to the judge to deal with its €3,500 million debt and whereby avoid the liquidation of the company.

One of the discrepancies between Martinsa and its creditors is a mismatch of up to 70% in the valuations of its assets. For this reason, entities such as Popular, Caixabank, Abanca and Sareb will not be joining the agreement.

Two weeks ago, the Supreme Court rejected a claim for €1,500 million that the company had filed against the former managers of Fadesa and in doing so further compromised the feasibility of the real estate company controlled and chaired by Fernando Martín.

Moreover, the High Court ordered Martinsa to pay the legal costs (of that trial), which according to financial sources, amounted to €50 million, somewhat higher than the amount for which the company, which lacks liquidity, had make provisions.

On 30 December, Martinsa Fadesa submitted a request to the Commercial Court of La Coruña to reform the creditors agreement that in March 2011 enabled it to avoid the largest bankruptcy in Spanish corporate history. The real estate company has requested a modification to the agreement on the basis that it is impossible for it to meet the debt payment calendar established.

Original story: Expansión

Translation: Carmel Drake