Spanish investors in Gecina file for bankruptcy

Two Spanish investment firms that own 31 percent of French property company Gecina have filed one of the biggest bankruptcy actions in Spanish history after a bank refused to refinance a 1.6 billion euro ($2.1 billion) loan.

Alteco, owned by former Gecina chairman Joaquin Rivero, and peer MAG Import said they had kept up with their payments on the syndicated loan, and the refinancing effort had been supported by other banks involved.

“This is the first request for creditor protection filed in Spain when the parties where up to date on payments,” the two firms said in a statement on Wednesday.

The uncertainty over the fate of the firms' stake in Gecina, which has struggled with boardroom unrest and debt problems of its own for some time, knocked the French company's shares down 5 percent to 76.3 euros.

“Gecina is already being run in a context of mistrust, and this does nothing to help things,” said Pierre-Loup Etienne, analyst at AlphaValue.

While the 31 percent stake - worth about 1.55 billion euros at Tuesday's closing share price - was likely to be frozen during bankruptcy proceedings, Etienne said the risk of a future block sale was limited because Gecina's heavy exposure to the slowing Paris office market would ward off many investors.

“And the banks aren't interested in surrendering their bonds at a discount since they would register losses,” the analyst said.

Spanish banks have already written off billions of euros in losses on real estate investments after a property market crash in 2008 and are now waiting for rescue funds from Europe.

Thirteen banks are involved in the syndicated loan, with Popular, Bankia, NCG, France's Natixis and Royal Bank of Scotland among those with the most exposure, sources with knowledge of the matter said.

One source said Natixis had balked at refinancing the loan.

The bank did not comment on its role in the bankruptcy filing, but said its 266 million euro exposure to the Spanish property loans was mostly hedged.

A source close to the talks said Natixis had been “strict” during the refinancing talks, but “wasn't the only bank that didn't want to renew the credit line”.

Many businesses related to the property and construction sectors, once the main drivers of the Spanish economy, crumbled after the market crashed. Others have relied on bank refinancing to stay afloat.

Sources put Bankia's exposure to the syndicate at 234 million euros and Popular's was 264 million euros.

Shares in Bankia, which has already been taken over by the Spanish state, fell 3 percent, and Popular's were down 4 percent in Madrid trade.

Popular was the largest non-nationalised bank to fail a stress test on Spanish banks last week, forcing it into a 2.5 billion euro rights issue to bolster capital and avoid international aid.

“We understand this (Gecina) will be one of the credits included in the stress test to the sector,” Banco Sabadell said in a note to clients on Wednesday.

GECINA CONNECTION

Gecina, which manages a roughly 11 billion euro portfolio of offices, residential and student housing as well as health facilities, last year launched a 1-billion euro asset sale programme to shore up its balance sheet and reduce its debt.

The company, France's biggest office landlord, underwent a boardroom shake-up in October 2011, when its CEO was dismissed over strategic differences and replaced by Bernard Michel, a former executive at French bank Credit Agricole.

Alteco and MAG Import are owned by one-time real estate magnates the Soler family and Rivero, who was also the chairman and shareholder of Spanish real estate developer Metrovacesa .

Metrovacesa is Gecina's other main shareholder, with 26.8 percent, but it is now controlled by Spanish banks after a debt-for-equity swap.

The relationship between Gecina and its Spanish shareholders has been murky from the start. As chairman of Gecina in 2009, Rivero tried to navigate its purchase of a 49 percent stake in another Rivero property firm, Bami, for 108 million euros.

The deal fell through when Gecina's other shareholders rejected it. Rivero is facing corruption charges in France. - Reuters