* Vallehermoso put up for sale
* Hedge funds mooted as possible buyers
* Shares in Spanish builders outperform
(Adds details, fund manager quote, background)
By Sonya Dowsett and Jose Elías Rodríguez
MADRID, Oct 1 Construction company Sacyr
put its property division Vallehermoso on the block on
Tuesday, the latest move by a Spanish builder to offload assets
to cut debt dating from the country's burst housing bubble.
Sacyr is likely to sell Vallehermoso, whose assets mostly
consist of undeveloped land for residential use, for a symbolic
sum to rid itself of the unit's 1.2 billion euros ($1.6 billion)
of debt that is weighing on its balance sheet, analysts said.
Sacyr, which has changed its stock market ticker to dock a
reference to Vallehermoso, noted on Tuesday it would be able to
remove the unit's debt from its balance sheet by formally
announcing a decision to sell.
"This will have a positive impact on our results," a company
spokesman said. Shares in the firm rose more than 4 percent.
Sacyr had a debt load of 8 billion euros at end-July, with
six times more loans than equity, one of the highest ratios of
indebtedness amongst industry peers.
Spain's builders have been selling assets and seeking
business abroad in order to counter a downturn at home and pay
down debt built up during a near-decade construction boom which
ended five years ago.
Sacyr merged with Spanish housing firm Vallehermoso in 2003,
when Spain's debt-fuelled construction boom was in full swing,
to become Sacyr Vallehermoso. The unit is highly exposed to
Spain's housing market with around three-quarters of its assets
in undeveloped land and the rest in residential developments.
Undeveloped land is a particularly hard sell in Spain. While
official data shows land prices have fallen by nearly half since
their peak in 2007, some real estate experts believe they have
dropped at least 70 percent.
SHARE CORRECTION DUE?
The most likely buyers for Vallehermoso are hedge funds
currently moving into Spain to prepare bids for the property
management units of Spanish banks in the hope of breaking into a
market which has yet to yield many housing bargains.
Santander, Bankia and Caixabank
are amongst banks who have sold or are looking to sell or
contract out property units. Funds could use these divisions as
platforms from which to buy other real estate assets.
Sacyr said in June it had talked to funds and companies over
the potential sale of the unit. The company said on Tuesday it
had received interest in the business but no deal had yet been
struck, without giving details on price or potential buyers.
Shares in builders like Sacyr and FCC have jumped
in recent months as investors have welcomed management moves to
get their balance sheets in order. Hedge funds are also closing
off short positions as companies' prospects improve.
Sacyr's stock has more than doubled this year to date while
both Sacyr and FCC have greatly outperformed the Spanish
blue-chip index in the year so far.
Whereas Spanish builders have won contracts abroad, such as
Sacyr widening the Panama Canal in Latin America and
constructing toll roads in Chile, improvements in the outlook
for the Spanish economy have also given the stocks a boost.
Spain is expected to return to economic growth this quarter
after two years of recession.
However, one fund manager who took profits in Sacyr and FCC
a couple of weeks ago, said he thought the optimism was overdone
on the effects of a pickup in the Spanish economy for builders.
"I think the worst is probably behind us, but the recovery
will have its ups and downs and we're not going to see the level
of growth that will bring a jump in building contracts and
earning levels for some time to come," said Jose Lizan of Auriga
Securities, with around 300 million euros under management.
($1 = 0.7387 euros)
(Additional reporting by Sarah Morris)