Tag: proposed agreement

Reyal Urbis Files For Spain’s Second Largest Bankruptcy

21 June 2017 – Cinco Días

The long-awaited death of Reyal Urbis is approaching. The real estate company has failed to convince a majority of its creditors to accept the proposed agreement presented by the entity chaired by Rafael Santamaría, which included significant discounts of between 80% and 90% of a total debt balance amounting to €4,600 million. It is the second largest liquidation ever in history, following that of the property developer Martinsa-Fadesa, which folded with a debt of around €7,000 million.

The proposed agreement presented by the company has not received sufficient backing given that in the case of the ordinary debt, it only obtained favourable votes from 32.7% of the creditors; another 37.79% voted against the proposal and the remaining 29% abstained, according to legal sources. In the case of the syndicated loan, the votes did not reach the 75% threshold either.

The bankruptcy administrator, namely, the audit firm BDO, is obliged to communicate the result of the vote that takes place in Commercial Court number 6 in Madrid, where the judge will issue the proposed liquidation ruling, with an equity black hole of €3,436 million.

The liquidation of Reyal Urbis was finalised after its major creditors, including Sareb and the opportunistic funds that had acquired some of the liabilities in recent weeks, rejected the proposed agreement, as disclosed by Cinco Días at the end of May.

The company has liabilities worth more than €3,200 million corresponding to a syndicated loan, in which Sareb holds a crucial stake, with more than €1,000 million proceeding from loans from the former savings banks. In addition, Reyal Urbis owed almost €900 million in ordinary debt and more than €400 million to the Tax Authorities. In fact, the real estate company is the largest debtor on the list of overdue debtors published by the Tax Authorities.

The property developer is dying just a decade after its merger which saw it become one of the large real estate companies in the country, together with Martinsa-Fadesa, Colonial and Astroc. Its President, Rafael Santamaría, a technical architect by training, has spent his whole life working for the family business. He was appointed CEO in 1985 and took over from his father as President in 1997. In 2006, he starred in one of the largest deals in the sector, after acquiring Urbis from Banesto for €3,300 million.

But that joy was short-lived. The burst of the real estate bubble dragged him down, just like it did Martinsa, Habitat and Nozar. The company filed for voluntary creditors’ bankruptcy in February 2013 after Sareb, BBVA and Santander refused to refinance its debt.

Santamaría’s last ditch attempt to save the company came with an aggressive liquidation proposal. That plan included discounts of 90% on the ordinary loans. In the case of the syndicated loan, the offer included the “dación en pago” of assets, which would have meant accepting discounts of around 80%. In turn, the Tax Authorities negotiated a unilateral payment plan for the €400 million owed.

That aggressive plan did not seduce the creditors, who have seen the possibility of recovering their capital go up in smoke, choosing instead the option of liquidating the company’s remaining assets, which are currently worth almost €1,200 million.

Original story: Cinco Días (by Alfonso Simón Ruiz)

Translation: Carmel Drake

Sareb Rejects Reyal’s Proposed Payment Plan

1 June 2017 – Expansión

Reyal Urbis has taken another step closer to the precipice. Sareb, its main creditor, has voted against the agreement presented by the property developer to circumvent its liquidation. Yesterday, the deadline set by the judge for Reyal’s creditors to sign up to the proposed agreement came to an end and, according to market sources, the public company has rejected the plan submitted by Reyal Urbis, which filed for bankruptcy four years ago.

Sareb, the real estate company’s main creditor, with debt amounting to €1,000 million, had already expressed its doubts regarding Reyal’s payment plan. In the end, it has opposed the plan because it considers that the proposed discounts (on the debt), of between 88% and 93%, are too high and that the proposal to free up assets that are securing certain loans only serve to benefit Rafael Santamaría, the company’s President and majority shareholder.

Reyal’s other major creditors include Santander and funds such as Värde Partners, which are now working to find out the current value of the company’s assets, with a view to its possible liquidation. The US fund has been acquiring some of Reyal’s debt from overseas entities over the last few months and is now negotiating the purchase of more land, as Expansión revealed on 22 May. Värde’s aim is to take ownership of some of the real estate company’s plots of land and whereby strengthen its commitment to Spanish property, which has led it to buy Vía Célere and Aelca in recent times.

Another key player in the creditor pool is the Tax Authority, to which Reyal Urbis owes more than €400 million. The real estate company has offered to pay this debt using the funds it obtains from the sale of its assets, but it is proposing a very long term horizon.

At the end of 2016, Reyal Urbis’ liabilities amounted to €4,660 million and the group had negative own funds of €3,449 million. The assets, most of which are plots of land to be developed, were worth €1,170 million and its annual revenues amounted to less than €9 million. Reyal Urbis was created in 2007 following the merger of Reyal, led by Santamaría, and Urbis, the real estate arm of Banesto.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake

Reyal Urbis’ Proposed Agreement

30 April 2015 – Expansión

The real estate company Reyal Urbis has responded to the request made by the judge and several of its creditors to amend its proposed agreement, which it wants to use so overcome the creditors’ bankruptcy that it has been immersed in since February 2013. The company recorded further losses of €47.4 million between January and March, an increase of 61%.

Original story: Expansión

Translation: Carmel Drake

Reyal Urbis Appeals To Judge To Advance Its Payment Plan

27 March 2015 – Expansión

Negotiations / The real estate company, which has a debt of €4,000 million, has appealed against the judge’s request to change and clarify certain points of its proposed agreement.

The negotiations to enable Reyal Urbis to emerge from bankruptcy have taken an unexpected turn. The real estate company, chaired by its largest shareholder Rafael Santamaría, has decided to appeal against the request from the judge in charge of the bankruptcy process to modify various points of its proposed agreement.

The decision by the real estate company to postpone the changes requested by the judge has come as a surprise, given the very difficult situation it finds itself in. Reyal Urbis has debt amounting to €4,435 million, whilst its assets are valued at €1,345 million. Moreover, it has an equity deficit of more than €3,000 million.

In 2014, the company recorded a loss of more than €694 million. It has not made a profit for five years, due to the depreciation of its real estate assets and declining sales.

On 6 March 2015, the judge Franciso Javier Vaquer, head of the Commercial Court No. 6 in Madrid, asked the company to remedy deficiencies in the feasibility plan that it had presented a few days earlier. The proposal by Reyal Urbis included a discount of 90% for those creditors with mortgage guarantees from bilateral loans. In the case of creditors of syndicated loans, which included entities such as Santander, Sareb and Barclays, the real estate company proposes two options: one of them involves a discount of 90% and the payment of the balance using certain assets (Reyal reserved some of its portfolio, worth €260 million, for itself).

The second alternative is a discount of between 88% and 93% and a six year wait for the payment of the remainder, with a grace period of four years. In both cases, the discount to be applied “far exceeds the legal limits”, something which is not justified in the feasibility plan presented by Reyal Urbis, according to the judge.

Moreover, the judge also considers that in its business plan the real estate company does not explain how it is going to obtain the funds to pay the remainder of the debt.

These high discount rates would not apply to the Tax Authorities, another one of Reyal Urbis’s creditors, with a liability of €400 million, which the judge asks them to justify “if the bankrupt entity is willing to grant the AEAT (State Tax Administration Agency or Agencia Estatal de Administración Tributaria) unique, special or beneficial treatment that differs from that offered to other creditors of equal ranking (…), then Reyal should explain all of the details behind the unique, specific or preferential treatment or treat AEAT in the same way as it would treat creditors of similar loans with no option to refer to a subsequent agreement”.

The “Drag effect”

In its proposal, Reyal Urbis clings onto the bankruptcy reform law, approved last year, to obtain its exit from bankruptcy, even without the support of all of its creditors. “The company interprets that Article 121.4 of the Insolvency Act allows a vote in favour of the proposal by 75% of the creditors (by grouped liabilities) of the aforementioned syndicated loan to “drag” the remaining 25%”, they say at the company. This is something the judge rejects, since the waiver of the rights to receive (funds) should be made expressly.

The appeal raised against the judge’s request has surprised the financial creditors, which had expressed their willingness to accept significant discounts in exchange for holding onto the assets that were already provisionally awarded through the drawing of lots, and which featured as collateral in the refinancing agreements signed in previous years.

The main creditors believe that these changes requested are necessary, before they will consider submitting the possibility of accepting this plan or not to their respective boards of directors. If it fails to gain the support of the majority of the debt holders, Reyal Urbis will have to follow in the steps of its counterpart Martinsa Fadesa, which is in the middle of liquidation.

Nevertheless, the creditors have not completely given up on the process and believe that the appeal may afford Reyal extra time to present a proposal by consensus.

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

Translation: Carmel Drake