| MADRID, March 7
MADRID, March 7 The Spanish government is
working against the clock to reach a deal with builders over a
multibillion euro bail-out for nine bankrupt motorways which
could directly hit the country's deficit.
Talks that have dragged on for months were abandoned at the
end of last year, but have now resumed in the hope of finding a
solution before the first of the companies starts liquidation
proceedings in about a month.
Negotiations are focused on how to create a state-owned
holding company to manage the motorways with the minimum impact
on state coffers and without it constituting state aid.
"We are still working with the government on this," said
Julian Nunez, the chairman of Seopan, an association that
represents Spanish builders like ACS and OHL,
many of which won concessions to build toll roads from the
government during Spain's construction boom.
"The solution has to be the best for public interest,
minimising the impact on the state budget," he told journalists
at an event on Friday, adding that total debt associated with
the nine motorways was 5.1 billion euros ($7.1 billion).
The government hoped to reach a solution soon, he said, and
nothing was ruled out. The Public Works Ministry and the
Treasury Ministry declined to comment.
Under Spanish legislation, drawn up over 40 years ago, when
a private motorway goes bankrupt the state has to repay the
owners for the cost of the land and the construction.
Traffic on the nine toll roads, most of which connect Madrid
to outlying towns, has plunged during a recession. Many have
free national roads running alongside them meaning even fewer
cash-strapped Spaniards are prepared to pay.
Previous plans had centred on the creation of a partly
state-owned company to take on the debt as one long-term,
low-interest loan, while builders took a hit estimated at 1.7
billion euros on their investments.
With 20 percent of the equity held by the builders and 80
percent held by the state, this structure could count as state
aid though and be difficult to tally with European competition
laws, said one source with knowledge of the matter.
One model being considered now is a 100 percent state-owned
company that would assume the debt and add it to the national
debt, already expected to hit a record high of around 100
percent of economic output this year.
Spain is desperate to keep its budget deficit, currently at
around 65 billion euros, within strict Europe-imposed targets.
BOOM AND BUST
Nearly all of Spain's builders -- Ferrovial, OHL,
Abertis, FCC and ACS -- created joint ventures
during Spain's construction boom to win concessions from the
government to build the highways which account for around a
fifth of Spain's toll road mileage.
The joint ventures borrowed money from banks like Santander
, Caixabank and Bankia. Builders
have since written off most of the investment in the highways.
When they created the ventures the builders paid out about 1.8
billion euros in capital in the motorway projects, Nunez said.
The concessionary companies have bank debt of around 3.6
billion euros linked to the motorways, Nunez said. Banks have
declined to comment on the situation. Also in play is the
compensation cost to landowners for the land the highways were
built on, which is over 2 billion euros, he said.
If the government shirks from bailing out the motorways by
taking on their debt, the construction companies will start
legal proceedings against the state that could end up costing
the same in terms of the effect on the deficit.
"I don't think the government will want this to go to the
courts, as it won't benefit anyone," said Nunez of Seopan. "We
have around a month, maybe a little more ... This cannot go
further than June."
A government source said if the motorways went into
liquidation it would hit the deficit by no more than 3 billion
If the government and the construction firms fail to come up
with a solution before the first of the nine companies start
liquidation proceedings in about a month, it will complicate
matters by triggering legal claims, lawyers and builders said.
Lawyers and investors said more doubt would also be thrown
on the stability of Spain's legal and regulatory framework if
the government did not honour the 42-year-old law.
"If the government starts to try to pull out of honouring
the state guarantees, international investors may start to doubt
state guarantees in deals across the board," said Santiago
Hurtado, a lawyer at Deloitte Abogados in Madrid.
A generous system of subsidies for the renewables sector
created by the previous government led to a boom in investment
in solar and wind farms across the country. The government later
rowed back on the state support, angering investors.