Some five years after the bursting of Spain’s massive property bubble, the casualty list of companies and individuals that have fallen victim to what former US Federal Reserve Chairman Alan Greenspan termed “irrational exuberance,” in this case for bricks and mortar, continues to swell.
Real estate firm Reyal Urbis on Tuesday told the National Securities Commission (CNMV) that it was calling in the receivers after failing to reach an agreement with its creditors to refinance 3.6 billion euros in debt in what is the second-biggest failure in Spanish corporate history. The biggest collapse was also a property company: Martinsa Fadesa, which eventually managed to escape being wound down after reaching an accord with its bankers to pay back 7.2 billion euros in liabilities over 10 years.
In a later statement to the CNMV, Reyal Urbis said it remained in talks with its creditors to find a solution to its financial problems. It said that the solution would revolve around setting up a subsidiary to which practically all of its assets and liabilities would be transferred. The option also remains open to creditors of canceling loans granted to the group in exchange for property assets, an arrangement known as dation in payment.
The CNMV suspended trading in Reyal Urbis shares, which closed Monday at 0.1240 euros, giving it a market capitalization of a mere 36.2 million euros.
Reyal Urbis’ creditors include the asset-management firm Sareb, the so-called bad bank set up by the government to absorb the toxic property assets of the country’s banks, an arrangement that may also help out the sclerotic real estate sector.
Other creditors include Spanish banks Banco Santander, BBVA and Banco Popular, the fund Appaloosa, which acquired debt extended to Reyal Urbis by Barclays, Portuguese state-controlled lender Caixa Geral, Germany’s EuroHypo, and Royal Bank of Scotland. Reyal Urbis also owes the tax authorities 400 million euros, and had received funding from the Spanish state lender Instituto de Crédito Oficial (ICO).
Reyal Urbis initiated talks with its creditors in the middle of 2011. In October of last year, the real estate firm availed itself of an arrangement available in Spain’s bankruptcy laws known as pre-receivership, a period during which a company can try to reach an arrangement to satisfy its creditors.
The company was suffering treasury problems and was technically bankrupt. It posted a loss of 257 million euros in the first nine months of last year, the latest period for which its financial results are available.