Reyal Urbis has requested a request for a voluntary concurso de acreedores, which is a legal proceeding that arises when a person or entity becomes insolvent and cannot make payments on debt and other financing obligations. The company faces 3.613 billion euros in debt obligations, which is the secong highest debt load in the history of Spanish corporations. Martinsa-Fadesa held 7.1 billion euros in debt.
Reyal, a real estate titan built by Rafael Santamaría ought to have closed its doors in 2010, but instead has chosen a slow, two-year demise thanks to not complying with a payment plan set up with credit providers and the Ministry of Finance, which it owes 400 million euros. But the situation turned out unsustainable because revenues from the company's real estate business was not enough to pay the interest on its loans.
After the fourth attempt to refinance its debt with creditor banks like Santander and Banesto (530 million), Sareb (707 million), Popular (220 million) and BBVA (120 million), the companies have decided to pull the plug and carry out an organized liquidation of assets with a market valuation less than the total amount of debt owed. The concurso symbolizes a change in the way banks and real estate developers do business. Collectively they will refinance 6.5 billion euros in four years.
This is a major amount that, combined with few ideas for how to fix the problem, will leave one of Spain's major players with no way to renegotiate its debt. The time has come, then, for the banks to help viable companies survive and let fail those whose only hope is to raise capital requirements. Overhauling the sector means that only the firms that have the flexibility to adapt to changing situations should be backed.
