Merlin & Hispania Prepare To Issue Bonds In 2016

26 November 2015 – El Confidencial

(…). The new kings of the Spanish real estate sector have begun the second phase of their adventure in the markets and, after starring in the bulk of the stock exchange’s IPOs over the last 1.5 years, they are now preparing to issue bonds.

The two key players in the sector, Merlin and Hispania, have taken the lead and are already working with the main ratings agencies to receive their ratings in 2016 and, as a result, make bond placements in order to adjust their financial structures.

The Socimi led by Ismael Clemente is more advanced in this process, because it began to work with the three ratings agencys – S&P, Fitch and Moody’s – to obtain an investment grade rating as part of its process to purchase Testa for €1,800 million.

The company’s plans include registering a bond program, which would be divided into between two and four placements, through which it expects to raise between €800 million and €1,000 million. Although the company’s timings are slightly delayed with respect to its initial plans, its objective is to have everything ready during the first half of next year.

Hispania is working to a similar time frame, conscious that in an environment marked by zero and negative interest rates, fixed income securities represent the perfect way of raising capital, above all in the case of real estate companies, such as Socimis, which make significant block investments to acquire assets that have long-term business plans.

In fact, Merlin and Hispania’s interest in obtaining an investment rating is leading the way for other companies in the sector, a general move in line with the group movements that these companies have been making over the last two years.

Natural step

In this way, whilst in 2014, the general trend was towards IPOs, through which they raised their first significant capital inflows, in 2015, the major trend was towards capital increases, through which the largest players in the sector alone – Merlin, Hispania, Lar and Axiare – raised almost €2,000 million.

The next natural step, therefore, is for these entities to request investment ratings to enable them to go to the debt market. Nevertheless, this is not an unfamiliar step for some companies in the sector. Uro Property, Santander’s landlord, has already completed a €1,350 million bond issue; whilst Lar launched a €140 million bond issue at the beginning of the year.

The difference with respect to the step that Merlin and Hispania are taking is that those placements were made outside of Spain, in Luxembourg and Ireland, respectively, without first obtaining a rating. In the case of Uro, the Socimi that exclusively comprises Banco Santander branches, it managed to achieve a rating for its placement equivalent to that of its tenant, although the Socimi has no been assigned its own rating.

Meanwhile, Lar completed its placement to raise funds, unlike Merlin and Hispania, which are aiming at taking advantage of the low interest rate environment to reduce their financing costs and, moreover, adjust all of their financing to suit their vocations as long-term businesses.

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake

Uro Engages BNP To Sell 40 Santander Branches

16 November 2015 – Expansión

Mandate / The Socimi owns 775 branches that it acquired from the bank chaired by Ana Botín under a ‘sale and leaseback’ agreement.

Uro Property, the Socimi that owns one third of Santander’s branch network, is looking for new tenants. The company has engaged BNP Paribas Real Estate to sell or re-let 40 branches released by the entity chaired by Ana Botín.

The bank’s exit from these branches is a reflection of its strategy to gradually reduce its installed capacity – a strategy that the whole sector is undertaking – and forms part of the contract between the entity and Uro Property. Under this agreement, Santander may exit between 4 and 5 branches per year. That figure has been increased for 2015 following the refinancing carried out by the Socimi during the summer.

Uro is the successor company of Samos, which purchased 1,152 offices from Santander in 2007 under a sale & lease back arrangement for €2,040 million. The entity’s high debt level caused the creditor bank to capitalise come of its bonds in 2014, with Santander, Atisha (the former Sun Group), CaixaBank, Phoenix Life (formerly Pearl) and BNP taking over control.

Stock market

At the time, the entity made a commitment to list on the stock exchange, which it did last March, debuting on the Alternative Investment Market (‘Mercado Alternativo Bursátil’ or MAB). It began life by listing at €100/per share and after distributing a dividend of €59/per share, closed trading on Friday at €57/share. Excluding the payment to its shareholders, the company’s share price has increased by 13% since its debut.

Uro sold 381 of the 1,152 branches it acquired initially to Axa Real Estate for around €300 million. They had a gross leasable surface area of 90,000 m2.

Following that operation, Uro now owns around 775 branches, for which it receives annual rental income of just over €100 million.

Now that 40 branches have been released by Santander, Uro Property faces the challenge of looking for new business solutions for the first time. Its priority is to sell the branches one by one, maximising the price. Although by quantity, these branches represent 5% of the total portfolio, they are worth just €20 million, which represents just 1% of the €1,800 million appraisal value of the Socimi’s properties.

These 40 branches have a combined surface area of 9,500 m2 and 50% of them (by surface area) are located in Madrid and Barcelona, whilst the remaining 50% are distributed across the rest of Spain. The properties will be sold empty and may be converted into shops, service outlets or used for other commercial purposes.

Shareholder structure

In addition to the management of these properties, the other major challenge that Uro Property will face in the coming months is the possible renewal of its shareholder structure. The Socimi’s investors have pledged to continue as shareholders for one year after the company’s debut on the stock exchange; that period will expire in March. Subsequently, one or more of the original investors may exit the company, such as Atisha and Phoenix Life, or other entities. In addition to Santander, CaixaBank and BNP Paribas, other shareholders include Burlington, Société Générale and Stichting Z+S.

Another key milestone for the company in recent months was the refinancing of its debt, which it achieved through an income securitisation amounting to €1,345 million, with a term of between 22 and 24 years. Uro Property agreed a fixed interest rate of 3.348% with investors, whereby reducing its financing cost from 6%, including interest rate derivatives.

The company is led by Simon Blaxland as the CEO and is chaired by Carlos Martínez Campos, the former number one at Barclays in Spain.

Original story: Expansión (by J. Zuloaga)

Translation: Carmel Drake

Banks Still Hold Doubtful & Foreclosed Assets Worth €224,000M

5 November 2015 – Cinco Días

Spanish financial institutions held doubtful and foreclosed assets amounting to €224,000 million on their balance sheets as at June 2015, according to data published by the Bank of Spain in its latest Financial Stability Report.

In its report, the body led by Luis María Linde (pictured above) warns that these unproductive assets are placing “negative” pressure on entities’ income statements, reducing their ability to generate profits, since they do not generate any revenues. These two types of assets represent 8.7% of the total assets of the banks in Spain.

Nevertheless, the volume of assets foreclosed or received in lieu of debt payments from businesses in Spain, held on the financial institutions’ balance sheets decreased by 0.9% in the last year to amount to €81,000 million. (…).

Meanwhile, at the consolidated level, the total amount of refinanced or restructured credit increased to €211,000 million as at June 2015, of which 52.1% related to non-financial companies and 45.2% corresponded to households.

Less refinanced credit for the private sector

2.4% of the total related to loans to Public Administrations, whilst the remaining 0.3% corresponded to financial companies other than credit institutions. The total volume of loans to the private sector that had been refinanced or restructured amounted to €163,800 million in June 2015, i.e. 15.8% less than in the same month a year earlier.

The Bank of Spain said that this variation represents an acceleration in the decrease seen over the life of the index, which began in March 2014. The decrease in the volume of refinancings and restructurings over the last year has been centred around non-financial companies (17.5%) and households (13.5%).

Meanwhile, the weight of refinancings and restructurings over the total credit balance has also decreased in recent quarters to account for 13% in June 2015, compared with 14.2% in the same month a year earlier.

Doubtful loans accounted for almost half of the refinanced and restructured loan balance (with a slight decrease of one percentage point with respect to last year), whilst those classified as sub-standard loans represented 18% of the total and those regarded as up-to-date (performing) loans accounted for 33% of the total.

In terms of the distribution of refinanced operations by sector, 64% corresponded to loans granted to companies, whilst the remaining 36% related to household debt.

Half of the refinanced operations relating to companies corresponded to loans granted to companies operating in the construction and real estate sector.

Finally, 26.2% of the restructured operations relating to households corresponded to loans granted to finance house purchases.

Original story: Cinco Días

Translation: Carmel Drake

Metrovacesa Sets Up A ‘Land Bad Bank’ To Carve Out Its Residential Business

8 July 2015 – El Confidencial

Make someday today (‘Algún día es hoy’). The slogan of Metrovacesa’s new marketing campaign is a declaration of intent regarding the direction that the real estate company has decided to take now that Rodrigo Echenique has taken over as the new Chairman of the company.

In this context, and having closed the refinancing of the company, the Director has set the objective of restoring the company to its past splendour and consolidating its position as one of Spain’s largest real estate companies, capable of competing head to head with Colonial and with the large socimis, such as Merlin and Hispania, which are now establishing themselves amongst the main landowners in the country.

The first step of this ambitious strategy entails a move that the experts in the sector have been pondering for some time…and which the company is already working on: the creation of a bad bank for its land assets. Sources at Metrovacesa say that although the option is already on the table, a final decision has not yet been taken.

The real estate company’s plans involve making a similar move to the one implemented by Colonial five years ago, when it separated its land and development assets and placed them into a newly created company, called Asentia. It was the beginning of an ambitious clean-up plan that was completed last year, when the subsidiary was sold to several funds.

In the case of Metrovacesa, the idea is to separate the residential and land businesses, according to sources close to proceedings, to focus on growing its property business, especially the buildings located in prime areas, which represent 75% of its turnover. The thorniest point of this strategy are the provisions that will likely have to be made to carry out the carve-out, which will be offset when this business is sold, since that will allow it to deconsolidate all of the associated debt. (…)

In its results for 2014, Metrovacesa already included several provisions for losses on certain assets and valued its entire portfolio at €4,800 million. The portfolio comprises: 8 shopping centres and 2 more that are being constructed (one is scheduled to be opened this year and the other has been placed under review); 8 hotels in operation, as well as the hotel that Barceló will manage in the Torre de Madrid; and 34 office buildings, the jewel in the group’s crown, which have a combined gross leasable area of 520,000 m2, in Madrid and Barcelona.

In terms of housing, the real estate company owns 35 developments across ten provinces (…), whilst in terms of land, it is currently marketing plots to individuals in another half a dozen municipalities (…).

But the bulk of the group’s land business comprises developments that are underway in Alicante, where it plans to construct 300 homes in an urban development covering 48,000 m2; Sevilla, with Project Palmas Altas Sur, a plot measuring 679,223 m2 where 2,870 homes will be built; Tarifa, where it wants to build la Ciudad del Surf, with 600 hotel beds, 7,500 m2 of retail space and up to 250 homes; Hospitalet del Llobregat, close to Barcelona, comprising almost 160,000 m2 of buildable space for tertiary use; and Madrid, where the company is trying to obtain permits to build a residential development on the site of the former Clesa factory.

Following the capital increase approved last spring to capitalise the group’s bank debt, the shareholders of Metrovacesa currently include Santander, which holds a 58.67% stake, BBVA (19.42%), Banco Sabadell (13.85%), Popular (7.99%) and other small investors (0.071%).

Once the residential business has been carved out, the entities will have to agree on the best way to maximise the value of their shareholdings, from a range of possibilities that have been put on the table. These include: creating a hotel Socimi, finding a partner to buy some of the capital and listing on the stock market.

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake

The Cerecedas Seek Financial Partner To Buy 30% Of Procisa

3 June 2015 – El Confidencial

Procisa, the real estate company made famous for developing the luxury La Finca estate is looking for a financial partner to provide the financial resources that it needs to continue with its other developments.

At a time when the interest of international funds in the Spanish real estate market is being called into question, one of the country’s iconic property developers is attracting interest from several overseas investors. Procisa, the company owned by the Cereceda family, which was made famous for its development of the luxury La Finca estate, is negotiating the sale of up to 30% of its share capital and is holding talks with several institutional investors.

The process, which is being managed by N+1, has been on the radar of the large players in the sector for several months – they see this as an opportunity to invest in a company that owns some of the most important plots of land in the capital.

After initially exploring the option of an IPO, which was dismissed following analysis with Citi, the real estate company has made progress in its talks with a small number of funds to which it has proposed the deal, with the clear message that their role will be limited to one of financial partner.

In line with the deals closed by other companies in the sector – GMP sold a 30% stake to GIC, and Acciona agreed to allow KKR to join as an investor – Procisa plans to form an alliance with a major investor, which will take a minority stake, but which will provide the financial resources the RE company needs to continue with its promotions.

N+1 has knocked on the doors of giants such as Goldman Sachs, JP Morgan, Cerberus, Bank of America, KKR and Blackstone to propose the deal to them. They could end up acquiring a stake of less than 30%, but this would be represent a historic milestone for this family company, led by Susana Cereceda, following death of her father, Luis Cereceda García, five years ago.

(…)

A RE giant, heavily dependent on bank financing

With assets of €900 million, own funds of almost €200 million, debt amounting to €600 million and losses of €13 million in 2013 (the last year for which official results are available), the company is looking for a financial partner, after it reached an agreement with its lender banks last year to accommodate a loan amounting to €400 million, dating back to December 2009 and after it consummated the merger with Agruva and Luarce, some of the other companies through which the Cereceda family has constructed its real estate empire.

(…)

During these talks, the banks imposed a series of conditions on Procisa, which explains why the Cereceda family is now keen to find a financial partner that will allow it to resume its activity, after years of decreasing results and the creditors’ sword of Damocles hanging over its head.

(….)

As well as La Finca, Procisa is also the owner of Parque Empresarial La Finca, an office complex on Calle Cardenal Marcelo Spínola (Madrid), as well as several office buildings spread across the capital and it is planning the development of two replicas of its famous Somosaguas development in La Romana (Dominican Republic) and Cartaya (Huelva).

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake

Husa Proposes Discount Of More Than 70% To Its Creditors

3 June 2015 – Expansión

The hotel chain Husa, chaired by Joan Gaspart, presented a proposed agreement yesterday, in which it committed to paying around €70 million of its €240 million debt. The company has proposed that its lender banks take ownership of its assets and that a new manager, controlled by Park Street, in which Husa would own a minority stake, takes care of the operation of the assets.

Husa’s proposal represents an average discount of more than 70%, although it would be distributed very differently depending on the type of creditor. For public and privileged loans, the discount would be around 10%; and for ordinary and subordinate creditors, the discount would increase to 95%.

Original story: Expansión (Marisa Anglés)

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

Slim Negotiates A Deal With Hispania To Take Control Of Realia

6 March 2015 – Expansión

ALLIANCE / The businessman is building bridges with the Socimi, which has an agreement in place with the group’s creditors to restructure its debt. Slim may transfer some assets or engage the management of the real estate company to his rival.

The takeover war being fought between Hispania Real and Carlos Slim’s real estate company Carso, for the control of Realia may end with the waving of a white flag. On Wednesday, the Mexican businessman announced his acquisition of a 24.953% stake in Realia’s share capital from Bankia and “in addition” that he would be launching a takeover bid for 100% of the company’s shares at a price of €0.58/share.

The businessman’s offer exceeded the one made by the Socimi in November for €0.49 per share, by 18%. That takeover bid is still pending approval by the CNMV.

In his favour, Slim’s offer does not only win on price. The Mexican businessman is also the largest shareholder in FCC, which in turn owns a 36.9% stake in Realia. After Slim joined the construction group, FCC announced in February that it would be suspending the sale of its stake.

Agreement

Nevertheless, Hispania still has an ace up its sleeve. The Socimi created by Azora’s managers, Fernando Gumuzio and Concha Osácar made an agreement with Fortress, King Street and Goldman Sachs before launching the takeover bid. The three funds have lent €793 million of the total debt (€1,097 million) held by Realia. Those loans, sold by Sareb, Santander and CaixaBank last year, are due to mature soon: on 30 June 2016. Moreover, when the funds agreed to purchase the debt, they also agreed with Realia that, in the event of a change in more than 30% of the shareholders, then the whole debt amount would have to be repaid “immediately”.

On 21 November, Hispania made an agreement with the creditors in which the funds agreed not to exercise their shares and not to demand the full repayment of the financing that would result from the application of the change of control clause. In exchange, Hispania purchased 50% of the receivables that each one of the funds possessed, at a discount of 21%. This partnership makes Slim’s assault on the real estate company more difficult, and so the Mexican has not wasted any time building bridges with his competitor.

The main obstacle facing Slim is that Hispania and the funds agreed an exclusivity period of seven months for the execution of the agreements, extendable up to ten months if a competing offer were presented. “During that exclusivity period, neither of the parties may initiate, encourage, lead, trigger, conduct or respond to any offer, proposal, contact, conversation, negotiation or approximation of any kind, with or from any third party, regarding the implementation of any operation that may be similar or incompatible with the execution of transfer of the loans resulting from the financing to Hispania Real”, says the agreement. This means that Slim and the funds may not make any agreement until 21 September without taking Hispania into account.

Against this background, the Mexican businessman has chosen to forge an alliance with his rival, to reduce this period. In exchange, according to close sources, Slim is offering the Socimi some capital, some assets to increase its own equity or the opportunity to participate in Realia as its manager. Inmobiliaria Carso, the vehicle that Slim wants to use to acquire Realia, does not have either the structure or the knowledge of the Spanish market held by Hispania’s managers, and therefore a deal between the two cannot be ruled out.

Consideration

The prior agreement with Hispania places the creditor funds in an advantageous situation in the context of the new offer. In the event that the Socimi does decide to raise the price of its takeover bid, Fortress, King Street and Goldman Sachs would receive €38.25 million more for 50% of their debt. If, on the other hand, the Socimi decides to withdraw from the process, the funds shall pay Hispania €5 million “provided that the rights of creditors’ loans have satisfied the nominal”.

Original story: Expansión (by R. Ruiz, D. Badía and C. Morán)

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

Sareb Holds Board Meeting As Martinsa’s Deadline Looms

26 February 2015 – Cinco Días

Sareb held an ordinary Board meeting yesterday (as it does once a month) with the case of Martinsa Fadesa on the table. The creditor banks of the real estate company have until today, Thursday, to decide whether or not to approve the new proposed agreement presented by the company to avoid its liquidation. According to financial sources, the debt obligations that Sareb holds in Martinsa Fadesa amounted to €1,457.8 million as at June 2014. The (real estate company’s) second largest creditor is Caixabank with €907.9 million.

Martinsa Fadesa submitted a new proposed agreement to avoid its liquidation to its creditors on 30 December, since it is unable to make some of the payments stipulated in the previous agreement. Under the new proposal, the company highlighted that if it won its claim in the Supreme Court against Manuel Jove, the former chairman of Fadesa, against whom it had filed a multi-million euro lawsuit, then it would allocate the resources to pay its creditors.

Fernando Martín (pictured above) agreed the purchase of Fadesa from Manuel Jose between 2006 and 2007, in a transaction valued at €4,045 million. In 2008, Martinsa Fadesa filed for bankruptcy, the largest ever case in Spain, with debts of approximately €7,000 million. In 2011, the company reached a payment agreement with its creditors and so emerged from bankruptcy. That same year, the company decided, in its shareholders’ meeting, to file a social responsibility claim against Jove and the former CEO of the company, Antonio De la Morena, for €1,576 million. The former Chairman of Fadesa, who is now the Chairman of the Inveravante group, said then that the measure was “absolute nonsense”. The Commercial Court number 1 in La Coruña and the Provincial Court of La Coruña rejected the claim filed by Martinsa Fadesa, and so the company appealed to the Supreme Court. This month, the Supreme Court also rejected Fernando Martín’s claim.

The blow dealt by the Supreme Court to Martinsa Fadesa damages the real estate company’s prospects of avoiding liquidation even further. In addition, the Supreme Court ordered the company to pay all of the legal costs, which will require the immediate disbursement of several million euros (up to €60 million, according to legal sources).

Between January and September 2014, Martinsa generated turnover of €95.2 million, an increase of €24.5 million on the same period in the previous year, and it recorded losses of €201.6 million (vs. losses of €322.9 million during the first three quarters of 2012). In 2013, the group lost €652 million, and recorded negative equity of €4,288 million.

Like many other real estate companies, despite having a negative net equity balance, Martinsa avoided the requirement for dissolution under the Companies’ Act, thanks to Royal Decree Law 10/2008, which removes the requirement to account for impairments relating to real estate investments. Martinsa’s financial position is clearly very delicate and may be further compounded by the fact that the Government may decide not to renew the relevant regulation this year.

Representatives of the creditors met with the company last week and called for the departure of Fernando Martín as owner and shareholder, according to sources. Although liquidation may seem like the most logical course of action for the company, the same sources do not rule out the possibility of a last minute agreement being reached to avoid that measure.

Original story: Cinco Días (by Alberto Ortín Ramón)

Translation: Carmel Drake