In A Xmas Shopping Spree Italy's Enel May Buy-up Endesa

Well if you want to know what this is all about you really need to read this post on Lukoil, Repsol and Sacyr where I spell out why it is Acciona needs to sell in such a hurry. Still, I didn't expect this to happen so quickly, yet the Italian daily Il Sole 24 Ore are reporting today that Enel SpA may buy the rest of Endesa before Christmas by purchasing Acciona’s 25 percent stake. Acciona has a put option to sell Enel its stake in Endesa from March 2010 at a price of 42 euros a share, although the two companies have been negotiating to bring forward an agreement.

Reyal Urbis Pressed To Raise 143 Million Euros


The chairman of Spanish building firm Reyal Urbis said yesterday (Wednesday) he had won a two-day extension on a 143 million euro debt owed to fellow shareholder Corporacion Financiera Issos. This whole situation seems to be a very tangled web of interlocked shgareholdings and intrigue, and perhaps the strangest part of the situation for the external observer is the fact that Reyal reecntly reached a deal with creditors to refinance its principal 3.006 billion euro debt in October, and it seems weird that they are now twiddling around with a mere 143 million. Almost 60 percent of Real assets are, however, tied up in what are now very hard-to-sell plots of land.

The background is that Rafael Santamaria, Real's chairman and majority shareholder, last year signed an option under which Issos could sell its 4.9 percent stake in Reyal Urbis back to the company for 10 euros a share or 143 million euros. This option was due to expire yesterday (Wednesday).

Reyal shares closed at 6.05 euros on Wednesday compared to 10.80 euros in June 2007 after Reyal bought Urbis in one of the biggest deals in Spain's then-thriving property sector. Issos is the private investment vehicle of Spanish businessman Jose Ramon Carabante.

Santamaria may hope to get the money he owes Issos from fellow developer Nozar. The unlisted firm also had until the end of Wednesday to pay Reyal Urbis 205 million euros it used to buy 5 percent of Colonial a firm with 10 billion euros of debt whose share price has collapsed this year. Obviously this is all very cliff hanging, and a short term solution may well be found. Spanish media have speculated the Nozaleda family may try to pay the debt in assets rather than cash, but then stumping up assets in this environment is almost like not paying, since what people need is cash.

In an indication of how all this can unwind quite badly under the domino effect weight of one seemingly fortuitous event another investor, Global Cartera de Valores, was also due to pay Reyal a 70 million euro debt by Wednesday night but last Friday Global Cartera filed for administration - a move which was dircetly related to its Reyal debt, according to Spanish newspapers. So basically, if they aren't carefully, a "mere" 143 million shortfall (remember Martinasa and the "anticipoated" ICO loan that never appeared) can simply unwind a carefully designed 3 billion euro, just like that loose thread I am looking at on my pullover can unravel the whole jersey spoon, if I don't do something. Darn it!


Hotel Prices Fall 8% in Q3

On the deflation alert anecdotal gossip front, the price of Spanish hotel rooms fell 8 percent this summer versus the same period 12 months earlier, according to online booking portal Hotels.com yesterday (Wednesday). Hotels.com, which claims to be the most visited online hotel booking website in the world, added that from July to September prices on Ibiza were down 36 percent from a year ago and in Malaga by 21 percent.

The average price for one night in a Spanish hotel stood at around 100 euros in the third quarter compared to 128 euros in the UK - a 13 percent fall year on year, it said. Britain and Ireland were the only European countries where hoteliers cut prices at a faster rate, but the effect is likely to be more marked in Spain since it is the world's second most visited destination and tourism accounts for some 11 percent of GDP.

House Prices Down 7.8% Y-o-Y In November

My feeling is that 2009 will be the year when realism finally arrives in the Spanish discourse about the current crisis. I think this for all sorts of reasons which I will attempt to explain in posts to come, but I think as we approach that point some of the data sources will become rather more reliable, and some of the forecasts rather more realistic.

A good example of this process is TINSA, Spain's leading property valuation company. According to their latest monthly Spanish house price index Spanish property prices fell by 7.8% over 12 months to the end of the November. The Tinsa index may not be perfect, but it is probably the best thing we have (as they say) and certainly a lot more realistic than the rather notorious Spanish Housing Ministry index. What this means is that Spanish house prices are now back to where they were between May and June of 2006, although this is certainly not very big beer yet, since arguably Spanish property prices were already hugely overvalued in the summer of 2006, and not that many people have mortgages of (LtV) 100% of the purchase value post summer 2006 - which is the real measure of bank landing risk as prices drop back. Still, this does now give us a yardstick to work from, and we will be able to follow this index back up river through the months, as property prices fall and fall.


Accounting Irregularities At Martinsa Fadesa


Naturally, a lot of the details behind what we are seeing on the surface at the moment will only become clear later, as events take their course. Some indication of what may be in store for us comes to light in the recent report of the court-appointed administrators handling Martinsa-Fadesa’s insolvency (as covered in the Spanish press). One example would be the plot of land in Guanarteme (Las Palmas, The Canaries) which belonged to Fadesa, and valued at 1 million Euros, and which was subsequently revalude at 170 million Euros following Martinsa's take over of Fadesa during the creation of Martinsa-Fadesa. Another plot of land in Culleredo (Galicia) was revalued from 1.5 million Euros to 84 million Euros, and the property in Puerto Real (Cadiz, Costa de la Luz, Andalucia), which went from 336,000 Euros to 65 million Euros, an increase of 19,000%. All these revaluations helped inflate the value of the assets on Martinsa-Fadesa’s books and allowed Martinsa-Fadesa to book a profit in 2007, and refinance its growing debt, despite its rapidly deteriorating financial situation.

Martinsa-Fadesa able to make these spectacular revaluations thanks to the tireless work of leading property appraisal companies like Tasamadrid (owned by Caja Madrid, one of Martinsa-Fadesa’s biggest creditors), and Ernst & Young, an accounting firm that approved the revaluations in its audit. The administrators’ report values Martinsa-Fadesa’s assets at 7.34 billion Euros, 32% less than a previous valuation by CB Richard Ellis, which doesn't mean, of course, that even this much more realistic current valuation will be what they will eventually be sold for. Far from it probably. Methinks that below all that concrete and cement lies a very large can of worms which has yet to emerge. The patience of Job is what we are all going to need here, and all will out eventually. And of course, the growing army of Spanish unemployed will have all the time in the world on their hands, just to watch and wait.


Brisk Demand For Funds At Spain's Second "Reverse Auction"

Demand for funds more than doubled at Spain's second auction to buy financial sector debt today (Thursday) as liquidity-starved banks seemed to shrug off the stigma of seeking government aid during the credit crisis. Spain's biggest banks Santander and BBVA did not take part but 37 smaller institutions did. As a result the Spanish government bought 7.2 billion euros in mortgage-backed debt from 31 banks at the auction, 91 percent of a maximum 7.9 billion euros, after receiving 9.65 billion euros in bids, according to the Economy Ministry statement.At the first auction on November 20 Spain bought 2.1 billion euros in debt from 23 banks, or 42 percent of a 5 billion euro ceiling, after 4.6 billion euros in offers. So they have now bought a total of 9.3 billion euros. Spain's Fund for Acquiring Financial Assets was estabilshed as part of the rescue programme to provide an alternative market for banks to issue long-term debt. Most institutions taking part were savings banks that are thought to have a high exposure to the property sector and are experiencing greater difficulty raising funds on the open market. Under the current plan Spain is pledged to buy up to 50 billion euros in bank assets, and guarantee around 200 billion euros in bank debt issuance, to prevent capital shortages in its financial sector and boost private sector lending. This scheme may well of course be expanded.