UPDATE 3-Spain's property market crash claims Reyal Urbis

Tue Feb 19, 2013 10:11am EST

* Spain's 2nd-largest insolvency after Martinsa Fadesa

* Reyal Urbis had 3.6 billion euros of debt at end-September

* Bank creditors say liquidation of property firms to rise

By Tomás Cobos and Tracy Rucinski

MADRID, Feb 19 (Reuters) - Spanish real estate firm Reyal Urbis has filed for insolvency, the second biggest casualty of the country's property market crash and a sign banks and the government may turn their backs on more indebted companies.

Dozens of property firm have already collapsed in Spain, where house prices have fallen around 40 percent from their 2007 peak. But until recently Spanish banks have refinanced billions of euros of debt in the hope of an economic upturn.

Liquidations are now more likely, bankers say, as prices continue to slide in a protracted recession and lenders, after a government-led clean-up, have set aside money to cover losses.

Nationalised banks have already cut their exposure to toxic property assets by putting them in a so-called "bad bank," which has said it will not get involved in refinancing debts.

The bad bank, called Sareb, was set up by the government as part of a 40-billion-euro European rescue of Spain's banks last year, and is Reyal Urbis's biggest creditor.

Sources at three bank creditors told Reuters the hard line taken with Reyal Urbis could be a taste of things to come.

"There are many refinancing and restructuring portfolios that will surface this year. Many lenders don't want to book provisions any longer," one said, on condition of anonymity.

"Many loans were refinanced one or two years ago, in the hope that things would get better, but it has not been the case and there is now more realism about the situation. Why would you extend a new loan today?"

Reyal Urbis was formed in 2007, at the height of Spain's property boom, when Reyal bought Urbis from Spanish bank Banesto to create one of Spain's largest real estate companies. Banesto ended up buying back some 400 million euros worth of assets in 2008 to help the already financially-strained developer.

Reyal Urbis is led and 70-percent-owned by construction magnate Rafael Santamaria Trigo and had 3.6 billion euros ($4.8 billion) of financial debt at the end of September. Total debt including that to suppliers and tax authorities was 4.3 billion.

As well as Sareb, which is owed 785 million euros, the company's creditors include Spain's biggest banks - Santander , owed 550 million euros; BBVA, owed 120 million; and Banco Popular owed 220 million.

Barclays sold 450 million euros of its debt to U.S. hedge fund Appaloosa, while Royal Bank of Scotland is owed 300 million euros.

POTENTIAL LIQUIDATION

Reyal Urbis, which valued its property portfolio at 4.2 billion euros in June 2012, said it would continue to operate as permitted by Spanish insolvency laws. Its insolvency petition now goes to court and its fate will be in the hands of a judge, who will decide whether to appoint independent administrators.

The court proceedings, which could take years, will either end in the liquidation of the company's assets or a plan to re-float the business.

Martinsa Fadesa, which defaulted on 7 billion euros of debt in 2008 and is Spain's biggest insolvency, and developer peer Habitat, which defaulted on 2.8 billion euros of debt, went into administration with similar portfolios to Reyal Urbis but resurfaced to continue operations. They posted losses last year.

The sources at Reyal Urbis's creditors said the fact the assets of the company were worth less than its debts did not bode well for its future.

A property expert familiar with the company also said Reyal Urbis faced a tougher time avoiding liquidation than the likes of Martinsa Fadesa and Habitat.

"Sareb holds some of the debt but has said it is not in the business of refinancing so it will be interesting to see what they do. On top of that, any liquidation wouldn't impact lenders as harshly as it would have two or three years ago," the source said, referring to the funds set aside by banks to cover losses.

At the end of 2011, Reyal Urbis owned some 888 finished homes in a country where over 3 million homes lie empty. The company also had 8 million square metres of land for development and 237,000 square metres of commercial property, including offices, shopping centres, industrial property and hotels.

"The high amount of land and low level of income producing property in the portfolio is clearly contributing to the pressure Reyal Urbis is under," said Roger Cooke, managing director at property consultant Cushman & Wakefield in Spain.

Land and work in progress accounted for about 65 percent of its portfolio at the end of 2011, according to the company's last annual report. ()

For now, Reyal Urbis said Santamaria would remain at the helm of the company and he still hoped it could reach a deal with its creditors and re-float the company.

Reyal Urbis shares have plunged 99 percent since June 2007 in line with stock losses ranging between 95 percent and 99 percent at competitors Colonial and Metrovacesa. Trading in Reyal Urbis shares was suspended on Tuesday.

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.