Owners of Metrovacesa Restructure Debt

Metrovacesa SA is Spain’s biggest developer. The owners have hired Lazard Ltd. to aid restructure their debt which is about 4 billion euros ($5.6 billion) of loans. These loans were mostly for the purchase of the company’s property market slumps.

The Madrid- based developer is mostly, about 80 percent, owned by the Sanahuja family. According to a press officer of Grupo Sacresa and Cresa Patrimonial, the family’s investment companies, that due to the falling property values and rising borrowing costs, the Sanahuja family has decided to hire Lazard since they were having difficulties in repaying their debt.

Struggles of Real Estate

Spanish government data showed that since 1998 it is the first incident when house prices fell where as home sales and mortgage lending collapsed by more than a third in the year to June. This most likely has been brought about by the rise of unemployment rates. In Spain the demand for new homes has decreased with the increase in unemployment. In effect the real estate companies are now struggling as interest rates rose since 2000.

A Madrid- based director at brokers Venture Finanzas SA, Francisco Salvador said that the combination of the financial crunch and the collapse of the real estate sector are becoming fatal. He further stated that the situation can increase pressure to Metrovacesa’s share price. Francisco Salvador has an “underweight” recommendation on property stocks.

At present in the Madrid trading, stocks has declined 35 percent this year to 52.80 euros. In the process of buying out the minority shareholders in 2007, the Sanahujas paid as much as 83.2 euros a share. The collateral for their loans was their shares in Metrovacesa.

Loans by the Sanahujas

According to data compiled by Bloomberg, in August of 2006 2.6 billion euros was borrowed by the Sanahuja’s Cresa investment company and two months later borrowed a total of 1.65 billion euros from other banks including Banco Bilbao Vizcaya Argentaria SA and Banco Santander SA. 500 million euros was also raised by Sacresa.

In the catalog of the takeover it was noted that almost 850 million euros was guaranteed by HSBC Holdings Plc to the Sanahujas to fund the acquisition of Metrovacesa shares. The guarantee matured in August.

Both Richard Creswell, London- based spokesman of Lazard and Patrick McGuinness, HSBC refused to give comments. Even the Madrid- based press officer at Metrovacesa, Ursula Guerra gave a cold shoulder when asked for a comment.

By hiring Lazard the Sanahujas will be counseled on strategy and plans for refinancing.
A Spanish real estate company, Inmobiliaria Colonial SA also hired Lazard to bargain new conditions on 8.9 euros of debt. It was also Lazard who bailed out Eurotunnel Plc in 2005. Now the Sanahujas hired Lazard to aid in restructuring their debt.