Caja Castilla-La Mancha Exposed To Failing Builders

OK, this is not big beer, since La Caja Castilla-La Mancha is not itself big beer, and the sums of money involved are pretty small, but it is indicative of what is to come.

The Spanish newspaper El Economista are reporting this morning - citing unnamed sources - that Spanish savings bank Caja Castilla-La Mancha has a 40 million euros ($62.3 million) loan with two property companies that are seeking to be put into administration. The companies, Masdevalia and One Properties, are owned by businessman Juan Antonia Roca and are involved in promoting two leisure complexes in Murcia, in southeast Spain.
For the unlisted savings bank, the outstanding loan represents almost double its EBITDA (earnings before interest, tax, depreciation and amortisation) reported in the first half of the year, the paper said. The property companies have asked to be put into administration because they are unable to meet a debt repayment of some 80 million euros in total, El Economista said.

The latest Spanish unemployment figures show a national rise of 23.17% in the number of unemployed, but in regions heavily dependent on residential construction, like Murcia (which is the community where unemployment has risen the fastest), the rise has been far more dramatic, with unemployment up 51.88%. And it is of course in Murcia that Masdevalia and One Properties have been building.

Also Banco Bilbao Vizcaya Argentaria SA, Spain's second-largest bank, had its rating cut this morning by Morgan Stanley because of the worsening outlook for the nation's economy. BBVA was cut to ``equal-weight'' from ``overweight'' by Eva Hernandez, an analyst at Morgan Stanley in London. She trimmed earnings forecasts for all Spanish banks for 2009 in a note to investors today.


Tourism Down


Profitability among Spanish travel companies has fallen below expectations and will continue to languish through 2009, Spain's biggest hotel group Sol Melia have said today. Sebastian Escarrer, co-vice president of Mallorca-based Sol explained to El Mundo this morning that the economic slowdown in Spain, aggravated by the credit crisis, was affecting tourism as much as other economic sectors.

"This summer demand, and therefore income and results, will be below expectations across the sector and this will continue at least into the last quarter of 2008 and the whole of 2009. have to prepare ourselves to face the deceleration in our two principle markets: the Spanish and British," said Sebastian Escarrer.

Escarrer added that a 15 percent weakening of the pound against the euro would have a major impact from 2009 since tour operators had already fixed their prices this year. His brother Gabriel, who is also a co-vice president, said the slowdown offered opportunities to companies like Sol as property developers, who have diversified into the tourist sector, are forced to sell assets to boost cashflow.

"In many Spanish cities like Madrid, Barcelona and Seville we are already seeing a freezing of the over-supply of recent years, many of the projects have ground to a halt, which will help to improve profitability in many establishments," said Gabriel Escarrer, whose family own 66 percent of Sol Melia.

The economic crisis had not had such a major impact on luxury travel, Gabriel Escarrer told the newspaper, but below that things were more difficult. "It's clear that everyone's pocket is suffering, but the mid-range sector is probably suffering with greater intensity."


And just to cap it all today, we learn that Euribor (12 months) – the interest rate normally used to calculate mortgage payments in Spain – rose to 5.361% in June, the highest level since the Euro was introduced. Euribor has now risen for 5 consecutive months, and is now 18.2% higher than it was a year ago. Compared to June 2004, when it dropped to its historic low of 2.103%, Euribor is now 156% higher, which is to say it is more than one and a half times greater. The latest rise in Euribor will push up mortgage repayments on variable, annually-resetting mortgages taken out last year by close to 900 Euros per year.