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Troubled Spanish property firm Colonial said on Monday it had reached an agreement with its creditor banks to refinance a total of around 7 billion euros of debt. A syndicated loan for 6.5 billion euros ($9.11 billion) would be converted into a long-term credit with repayment due in five years, the company said in a statement.
"The agreement also includes most of the company's non-guaranteed operational debt, taking the total restructuring to about 7 billion euros," Colonial said. Following the announcement, Spain's third-largest bank Popular said on Monday that it and savings bank La Caixa have withdrawn from Colonial's core shareholders' pact.
In a statement, however, Popular said it and La Caixa both supported the refinancing deal. A Popular source told Reuters that the bank did not plan to sell its 9.15 percent stake in Colonial, but added that as the shareholders' pact's objectives had now been met as far as the debt restructuring was concerned, they were withdrawing from the original agreement.
In April, a group of banks and savings banks agreed to swap outstanding debts owed by Colonial for a stake in the company. The banking consortium holds about 23 percent. It includes Banco Pastor and Valencia-based savings bank Bancaja. "The original shareholders' pact was always transitional, so I don't think the fact Popular and La Caixa are pulling out is negative," Renta 4 analyst Nuria Alvarez said.
"I expect these banks to be included in the core shareholders who have agreed to subscribe to Colonial's convertible bond issue, if the need arises," she said. As part of the refinancing agreement reached with its creditors, Colonial said it would issue 1.4 billion euros of bonds, convertible into shares at 0.25 euros each. The maturity date for the bond issue is five years.
In the event the bonds are not fully subscribed, the creditor banks and "some of the company's main shareholders" have agreed to subscribe up to 1.3 billion euros in exchange for part of their outstanding debt. Colonial's creditor banks are RBS, Calyon, Eurohypo and Goldman Sachs.
The Barcelona-based property firm said some of its creditors had also agreed to acquire non-strategic assets from Colonial to facilitate loan repayments and inject cash into the company. The assets to be sold include a 33 percent stake in French realtor SFL, 15 percent of Spanish constructor FCC and all of its fully owned property company Riofisa.
Colonial will retain a 51 percent stake in SFL. Renta 4's Alvarez said the planned asset sale "is going to the most difficult part of this debt restructuring deal". A local brokerage analyst agreed, noting "I would think the FCC stake sale is imminent, but the risk is Colonial may have to place it in the market, and no-one is going to pay a premium, that's for sure ... A discount is more likely."
Colonial paid 1.5 billion euros for its stake in FCC around the peak of Spain's now deflated property bubble in late 2006. It is now worth less than half that. Colonial Chairman Juan Jose Bruguera later said the company did not rule out a capital raising in the long run after the bond issue and assets sales. Managing director Pere Vinolas Serra added that there were unlikely to be changes on the board in the short term, but there could be in the long term. In total, Colonial has 9 billion euros of debt it used to finance expansion in the latter years of Spain's decade-long housing boom.
The market turned bad in mid-2007, triggering a fall in the realtor's shares and forcing it to sell. In July, Spain's largest real estate company Martinsa-Fadesa filed for administration, hit by the global credit crunch and the collapse of the Spanish real estate market. At 1102 GMT, Colonial shares were down 16 percent at 0.26 euros, while the blue chip IBEX-35 index had fallen 4.8 percent. FCC was down 5.3 percent at 30.21.

Copyright Reuters, 2008

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