Spanish shareholders of French property firm Gecina seek bankruptcy protection

Investment companies Alteco and MAG Import, controlled respectively by Spanish businessmen Joaquín Rivero and Bautista Soler, have filed for protection against creditors with a commercial court in Spain, declaring debt of 1.627 billion euros in what is one of the biggest bankruptcy cases in Spanish corporate history.

The two companies hold a combined 31-percent stake in Gecina, France’s biggest real estate company. The bankruptcy case is unusual in that the debt involved had been fully serviced. What detonated the decision to call in the receivers was French creditor bank Natixis’ decision to block the renewal of a syndicated loan in which 13 lenders participated.

The affected banks include Natixis itself, which is owed 266 million euros. Spanish banks in the syndicate are Banco Popular, whose share of the loan is 264 million euros, Bankia (234 million), NCG Banco (217 million) and Banco de Valencia (16 million). Bankia, NCG Banco and Banco de Valencia have been nationalized after coming unstuck due to their exposure to the floundering Spanish real estate.

Foreign banks in the syndicate include Royal bank of Scotland, which is due 212 million euros and Portugal’s Caixa Geral, which is in for 180 million.

Rivero and Soler were involved in a struggle for control of Metrovacesa at a time when it was Spain’s largest real estate company before succumbing to the crash in the Spanish market. Metrovacesa’s credit banks hold a 27-percent stake in Gecina, which has a market value of some five billion euros and real estate assets of 11.6 billion.

Rivero and the Soler family put up their stakes in Gecina as a guarantee against the syndicated loan and the current value of their interest in the market almost completely covers the amount of the credit they received. In fact, Alteco and MAG Import had paid off 600 million euros of the principal on the loan.

The two companies in April had reached an agreement with their creditor banks to extend and refinance the syndicated loan for a further two and a half years subject to three conditions: a viability plan, a favorable opinion from an independent expert and the lifting of an embargo imposed by a French judge on the payment of dividends to Alteco and MAG Capital by Gecina.

The first two conditions were met but the third one was not after Rivero and Soler failed to file a suit to have the dividend ban lifted in time. The embargo was imposed four years ago in connection with some operations carried out by Gecina when Rivero was chairman of the French company. These included the purchase by Gecina of a 49 percent-stake in Spanish property company Bami, which was also chaired by Rivero, and the acquisition of a plot of land from Metrovacesa, which was not approved, as required, by a Gecina shareholders’ meeting.

According to sources with knowledge of the negotiations, all of the banks in the syndicate with the exception of Natixis had agreed to extend the initial deadline given to Rivero and Soler to allow them to resolve the dividend ban issue.

However, since the agreement needed to be unanimous, the syndicate called in the loan. After calling in the receiver, the banks cannot for the moment exercise the guarantee attached to the loan. The Spanish court must now decide whether to allow the guarantee to be exercised or allow time for Soler and Rivero to resolve the dividend issue.