Santander & Sabadell Need To Recognise c. €400M in Provisions to Cover Sareb’s Losses

2 July 2018 – El Confidencial

The bad bank is continuing to generate problems for the Spanish financial sector. Both for the State, due to the stake held by the Spanish Fund for Orderly Banking Restructuring (FROB), and for the large banks, which own 55% of the entity’s share capital. In this way, the deterioration of the Company for the Management of Assets Proceeding from the Bank Restructuring (Sareb) is going to have repercussions for the banks, which will need to recognise additional provisions worth €402 million.

Specifically, the company chaired by Jaime Echegoyen (pictured above) has updated its business model to reflect forecast losses of 73% of the initial investment, which amounted to €4.8 billion in 2012 split between share capital (€1.2 billion) and subordinated debt (€3.6 billion). “It has performed a reality check, so now we know the figures that we have to stick to”, said one banking executive.

The entities most affected by these revised forecasts are Santander, following its incorporation of Popular, which now owns 22.22% of Sareb; CaixaBank with 12.24%; and Sabadell with 6.61%. Nevertheless, “the impact ought to be very limited, given that “the banks already have provisions to cover the majority of those losses”, explains Nuria Álvarez, analyst at Renta 4, in a note from the bank analysing Sareb’s revised business plan.

Banco Santander has a €1.07 billion exposure to Sareb, although it has now provisioned 50% of that figure, and so it needs additional provisions amounting to €246 million, according to calculations by JP Morgan. The analysts reduce the impact to less than 2% of the profits of the group chaired by Ana Botín.

Impact for Sabadell

The other entity that stands out in this sense is Sabadell, which, according to the US bank, has an exposure amounting to €323 million with current provisioning levels covering 29%, divided between €228 million in share capital and €95 million in subordinated debt. Therefore, according to these calculations, Banco Sabadell needs to recognise additional provisions amounting to €142 million.

The third bank with provisioning needs is CaixaBank, on the basis of these estimates, although they are somewhat residual. The bank chaired by Jordi Gual has an exposure amounting to €593 million, but with a 70% provision, meaning that its shortfall amounts to just €18 million. Meanwhile, Bankinter and Bankia do not have any provisioning needs, according to JP Morgan, and BBVA did not participate in the creation of Sareb.

The bad bank was created in 2012 to assist with the digestion of toxic property in the financial sector. Under the then presidency of Belén Romana, who has recently joined Santander’s Board ahead of the upcoming departure of Rodrigo Echenique, the entity promised profits to the banks to attract capital. The deadline for the completion of Sareb’s work is 2027, the year for which the revised business plan forecasts losses with respect to the initial investment.

Original story: El Confidencial (by Óscar Giménez)

Translation: Carmel Drake

Merlin’s Profits Soar By 1,000% After Metrovacesa Merger

2 March 2017 – Expansión

In 2016, the listed real estate investment company (Socimi) Merlin Properties managed to turn itself into one of the largest real estate companies in Europe. It also made the leap onto the selective Ibex 35, which had not featured a single company from the property sector since 2008.

And, it achieved these milestones thanks to the completion of the largest corporate transaction between real estate companies since the burst of the real estate bubble – the integration of the historical firm Metrovacesa, and that had a significant impact on its income statement for the year.

In this way, in 2016, Merlin saw its net profit soar by 1,087% to €582.6 million, thanks in large part to the contribution of Metrovacesa’s assets, which increased the value of its portfolio to €9,824 million.

In the case of revenues, the Socimi generated 362.8 million, the majority of which (€351 million) came from rental income. Last year, the contribution of rental income rose by 64% compared to 2015.

The firm’s operating profit or EBITDA amounted to €303.6 million, whilst its net debt, at the end of the year, stood at €4,471 million.


The company, which has just appointed Francisco Javier García-Carranza Benjumea, the Deputy General Manager at Banco de Santander, as its new President, to replace Rodrigo Echenique, has announced the distribution of an extra dividend, amounting to 20 cents, which will take the remuneration per shareholder in 2016 to €0.40 per share.

Likewise, the Socimi, which owns a 16.1% stake in Testa Residencial, has said that it will increase the distribution of profits amongst its shareholders by 10% in 2017 (as a Socimi, it is obliged to distribute 80% of its profits) to 44 cents, which will involve the distribution of more than €207 million.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake

Metrovacesa Refinances All Of Its Debt Ahead Of Its IPO

18 May 2016 – El Confidencial

Metrovacesa, the real estate company controlled by Santander, BBVA and Banco Popular, has managed to definitively emerge from the abyss into which it fell in 2009, when the then owner, the Sanahuja family, saw how the creditor banks enforced their guarantees for the €4,000 million that they were owed.

The company now chaired by Rodrigo Echenique, one of the strong men from the entity led by Ana Botín, has managed to reach an agreement with the creditor banks to refinance all of Metrovacesa’s financial commitments through bond issues and debt restructuring.

This week, the company will release €700 million in 6-year bonds onto the market with interest of 240 basis points. Once that test has been passed, Metrovacesa will restructure its remaining €1,100 million in financial commitments, an operation that may include another bond issue, now that it has received the ok from its creditor banks, with a similar term and margin.

With all of this homework done, the real estate company is completing an ambitious clean-up plan, which has led it to undertake: two capital increases in less than a year, for a total amount of €1,650 million; the carve out of its entire property development business into the recently created MVC Suelo; the sale of its logistics business; and a significant reorganisation of its shareholders, with Santander’s purchase of Bankia and Sabadell’s stakes, which allowed the Cantabrian entity to take over 70.27% of the group’s shares. (…).

Now, according to sources familiar with the company’s plans, once all of its debt has been restructured, Metrovacesa plans to return to the stock market, probably as a Socimi. Although no date has yet been set, they are working with a two year timeframe (…).

Proof of the good work done so far came in the form of the credit rating that the company obtained from the ratings agency S&P, which granted it a preliminary rating of BBB- and a stable long-term outlook, and Moody’s, which assigned it a Baa3 rating, also with a stable outlook. (…).

The resurgence of a giant

Following the carve out of its property development business, Metrovacesa has a portfolio of assets worth €4,300 million, primarily comprising office buildings for rent, although it also owns a sizeable package of shopping centres, a dozen hotels and more than 3,000 homes with a gross leasable area of more than 1.5 million sqm.

Those figures make it one of the giants of the reborn real estate business, alongside the Socimi Merlin, which led the return of property companies to the Ibex 35 following its acquisition of Testa, and Colonial, a mirror into which the company chaired by Echenique is looking to recover its past splendour and the only one of the large companies in the sector that has not converted itself into a Socimi, because the tax credits that it has eclipse the tax advantages of the new company structure.

Metrovacesa was excluded from the stock market in May 2013, after 72 years as a listed company and after seeing the creditor entities take control. Currently, Santander owns a 70.27% stake, BBVA a 20.52% stake and Popular a 9.14% stake. (…).

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake

NH Cuts Its Losses By 59% To €17.9M In H1 2015

29 July 2015 – El Economista

The NH Hotel Group cut its losses by 59.2% during the first half of 2015 with respect to the same period in 2014, to €17.4 million, after recording positive results in the second quarter, according to its report to Spain’s National Securities Market Commission (CNMV) yesterday.

The hotel chain highlighted that its strong performance last year accelerated further during the second quarter, to generate a net profit of €11.8 million, compared with losses of €4.2 million one year ago.

These positive figures were achieved thanks to an improvement in the volume of activity and the initial results of the initiatives launched as part of the group’s five-year strategic plan. Since launching the plan, the group has completed the renovation of 27 hotels.

This situation allowed NH to generate income of €665.3 million in Q2, i.e. 8.3% more than in Q2 2014, including the sales of Grupo Royal, whose results have been consolidated with NH’s since 4 March 2015 (€643.9 million excluding them).

The company highlights the strong performance of its turnover in Spain and Italy, with increases of 7.6% and 10.3%, respectively, during the first half of the year. Similarly, it has retained control over its costs, which have grown by much less than revenues. As such EBITDA increased by 25.2% to €57.2 million, whilst recurring profits rose by 36.7% to €62.5 million (€60.3 million excluding Hoteles Royal). (…).

The company’s net consolidated debt amounted to €814.9 million at 30 June…having increased by €40.5 million with respect to the end of Q1. This increase is due mainly to investments in the repositioning and maintenance of its hotels, and a payment to the minority shareholders of Hoteles Royal.

Echenique’s departure

In addition to these results, the NH Hotel Group also announced that its non-executive President, Rodrigo Echenique, will step down within the next few months to focus on his new role at Banco Santander where he was appointed Chairmain for Spain on 30 June, and also serves as the entity’s fourth Vice-President. The change will take place once NH has found the right person to take over from him. (…).

Echenique’s departure comes despite the fact that his continuation in office was ratified very recently, specifically after the entity led by Ana Botín sold its stake in the hotel chain on 20 May. Echenique has served as the President of NH since November 2012, when he took over from Mariano Pérez Claver.

Original story: El Economista

Translation: Carmel Drake

NH’s Minority Shareholders May Ask To Join The Board

29 May 2015 – Expansión

29 June / The agenda for NH’s shareholders’ meeting does not currently include the appointment of any new directors. UBS now holds a 4.36% stake.

In the interests of progress in terms of corporate governance and to increase transparency, many listed companies, including the NH Hotel Group, are adapting their corporate bylaws to the new Capital Company Act. Thus, NH will include a item on the agenda of its shareholders’ meeting, which will be held on 29 June, about the reasonable balance of its board of directors, whose composition should reflect the relationship between the stable and free-floating capital.

In fact, the composition of NH’s board of directors has sparked unrest amongst the fund managers and minority shareholders due to the hotel group’s decision to not cover the two vacant positions left by Intesa Sanpaolo, when it sold its shares, by independent directors. Yesterday, their fears were confirmed. The agenda for the shareholders’ meeting includes the ratification of two directors – Francisco Román as an independent director and Ling Zhang as a representative of HNA, the majority shareholder of NH – and the renewal of two other directors – José María López-Elola, as an independent director and José Antonio Castro, as a representative of the Hesperia Group. There was no mention of any new appointments.

NH’s board comprises 11 people in total: four representatives of HNA – which holds a 29.5% stake -, two from Hesperia – with a 9.09% stake -, three independent directors, the CEO – Federico González Tejera – and the Chairman – Rodrigo Echenique-, who continues in the role despite the exit of Banco Santander, the shareholder that he previously represented.

Nevertheless, the composition of the board may change in the short term. The 8.56% stake held by Santander was distributed amongst three (fund) managers, which already held stakes in NH: BlackRock, Oceanwood and Henderson. The first two now hold more than 7.5%. The funds, which have shared their concerns about the reduction in (the size of) the board with NH, will request their own inclusion on the board of directors and their request may be discussed at the shareholders’ meeting. According to the bylaws, shareholders that represent at least 3% of the share capital have five days following the announcement of the shareholders’ meeting to request the inclusion of one or more items on the agenda.

Meanwhile, UBS now owns a 4.36% stake. On 21 May, the Swiss bank purchased 9.13 million shares from Santander for €46.57 million.

The Chairman

Rodrigo Echenique received €300,000 in 2014. This year, he will receive €200,000, i.e. 33% less.


Federico González Tejera, the CEO, earned €1.62 million (in 2014), up 34%. His variable salary amounted to €788,000.

The other board members

In addition to Echenique and Tejera, the 16 people that held positions on the board in 2014 received €692,000 in total.

Original story: Expansión (by Yovanna Blanco)

Translation: Carmel Drake

Santander Appoints Echenique To Lead Metrovacesa

7 May 2015 – Expansión

The Vice-President of the financial institution will take over the reins at the real estate company, after the bank increased its shareholding in the group, which has cut its debt in half in recent months.

A new President for a new era. That is the decision that has been taken by the four banks that own the real estate company Metrovacesa. Santander, BBVA, Sabadell, and Popular have decided to place the reins of the company in the hands of Rodrigo Echenique (pictured above), the Vice-President of the bank chaired by Ana Botín and President of the NH Hotel Group.

The appointment of Echenique as a non-executive director comes barely two weeks after the company held its annual shareholders’ meeting, which approved the appointment of four new directors, including Echenique. Abel Matutes and Juan Ignacio Ruiz de Alda also joined the management board, as representatives of Banco Santander, and Manuel Castro, from BBVA.

Rodrigo Echenique (Madrid, 1946) holds a degree in Law from the University of Complutense in Madrid and is a non-practising State Attorney. He has been CEO of Santander and is currently a member of the group’s board of directors and executive committees, as well as the Vice-President. Moreover, he is the President of the NH Hotel Group and a director of Inditex. He has also served as President of Vocento.

In his new role, Echenique replaces Ignacio Moreno, who will continue to perform executive duties as CEO, after less than three years as President. Meanwhile, Carlos García León, who served as CEO until now, will continue his duties as managing director.

Capital injection

The appointment of the new President comes just days after Metrovacesca’s shareholders approved the capitalisation of debt amounting to €751 million and five months after Santander acquired the 19% stake that Bankia owned in the real estate company.

Following the two operations, Santander has strengthened its position as the primary shareholder in Metrovacesa, which it first entered in 2011 along with five other entities; it currently owns 58.67% of the share capital. It is followed by BBVA with a 19.42% stake and Banco Sabadell, with 13.83%. In January, the three banks granted a loan to the real estate company amounting to €751 million to allow it to cancel tranche B of its syndicated loan early; in April this loan was capitalised. The other major shareholder, Banco Popular, did not participate in the transaction and holds 7.99% of the capital.

The capitalisation of this loan, together with the sale of its 26.9% stake in the French real estate company Gecina, has allowed Metrovacesa to significantly reduce its debt, down from a liability of €4,999 million in 2013 to net financial debt of €3,285 million at the end of 2014.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake

Metrovacesa Approves Capitalisation Of €751M Loan

29 April 2015 – Expansión

The real estate company Metrovacesa, owned by Santander, BBVA, Sabadell and Popular, received the green light from its shareholders yesterday to convert a €751 million loan granted by three of its owner banks into equity.

Santander, the primary shareholder in Metrovacesa, which holds a 55.89% stake after it took over Bankia’s shareholding; BBVA, which owns 18.3%; and Sabadell, which owns 13.04%, granted a loan to the real estate company for €751 million in January. Now, the three banks have converted the refinanced loan into shares through this increase. Thanks to this transaction and the sale of its stake in Gecina, Metrovacesa has reduced its debt to €2,409 million, compared with the balance of more than €5,000 million that it accumulated last year.

In parallel to this transaction, a further increase has been agreed, through monetary contributions and pre-emptive subscription rights, for €0.9 million, aimed at minority shareholders.

At their meeting, the shareholders also approved the appointment of four new directors, which means that the management body will comprise 11 members. The new appointments include Rodrigo Echenique, Abel Matutes and Juan Ignacio Ruiz de Alda, representing Banco Santander and Manuel Castro, from BBVA.

Metrovacesa also approved its accounts for 2014. The real estate company reduced its losses by 50% taking its consolidated loss to €186 million compared to €349 million in 2013, according to sources close to the company. Meanwhile, the parent company recorded a loss of €21.6 million.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake