Spain's Second Largest Bankruptcy Roils Real-Estate Market, Leaves Tepper Potentially Scuppered?

Tyler Durden's picture

It's no shock that the Spanish housing market is horrible but hope has been, following the government's nationalization of various banks and creation of the 'bad bank' to soak up all the toxic crap those banks had on their books, that a recovery could blossom. It appears not - not at all. Not only are bad loans rising at record rates with house prices remaining down over 40% but now Reyal Urbis has filed for insolvency making it the nation's second largest bankruptcy as dozens of smaller firms have failed.

What makes this so important is the fact that the banks were unwilling to refinance the debt - seemingly comfortable with liquidation - summed up perfectly: "Many loans were refinanced one or two years ago, in the hope that things would get better, but it has not been the case and there is now more realism about the situation. Why would you extend a new loan today?"

Reuters reports further that the hard line taken with Reyal Urbis could be a taste of things to come as the firm leaves EUR3.6bn of debt and a property portfolio valued at a magical EUR 4.2bn - which we suggests the banks do not agree, and while the nation's bad bank is a major creditor, so it appears, is Tepper's Appaloosa holding a majestic EUR450mm in debt.


Perhaps helps to explain his recent BWIC on European banks..


Via Reuters,

Spanish real estate firm Reyal Urbis has filed for insolvency, the second biggest casualty of the country's property market crash and a sign banks and the government may turn their backs on more indebted companies.


Dozens of property firm have already collapsed in Spain, where house prices have fallen around 40 percent from their 2007 peak. But until recently Spanish banks have refinanced billions of euros of debt in the hope of an economic upturn.


Liquidations are now more likely, bankers say, as prices continue to slide in a protracted recession and lenders, after a government-led clean-up, have set aside money to cover losses.




Sources at three bank creditors told Reuters the hard line taken with Reyal Urbis could be a taste of things to come.




"Many loans were refinanced one or two years ago, in the hope that things would get better, but it has not been the case and there is now more realism about the situation. Why would you extend a new loan today?"




As well as Sareb, which is owed 785 million euros, the company's creditors include Spain's biggest banks - Santander , owed 550 million euros; BBVA, owed 120 million; and Banco Popular owed 220 million.


Barclays sold 450 million euros of its debt to U.S. hedge fund Appaloosa, while Royal Bank of Scotland is owed 300 million euros


Reyal Urbis, which valued its property portfolio at 4.2 billion euros in June 2012, said it would continue to operate as permitted by Spanish insolvency laws. Its insolvency petition now goes to court and its fate will be in the hands of a judge, who will decide whether to appoint independent administrators.




"Sareb holds some of the debt but has said it is not in the business of refinancing so it will be interesting to see what they do. On top of that, any liquidation wouldn't impact lenders as harshly as it would have two or three years ago," the source said, referring to the funds set aside by banks to cover losses.


At the end of 2011, Reyal Urbis owned some 888 finished homes in a country where over 3 million homes lie empty. The company also had 8 million square metres of land for development and 237,000 square metres of commercial property, including offices, shopping centres, industrial property and hotels.


"The high amount of land and low level of income producing property in the portfolio is clearly contributing to the pressure Reyal Urbis is under," said Roger Cooke, managing director at property consultant Cushman & Wakefield in Spain.


Land and work in progress accounted for about 65 percent of its portfolio at the end of 2011, according to the company's last annual report.

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Dr. Engali's picture

Instead of balls to the wall Tepper got a set of balls to the chin.

kaiserhoff's picture

Relax everyone.  This is why Ben tied all the banks together..., so that when one sinks.... oh wait.

walküre's picture

Spain is where the action starts. Greece was foreplay.

dtwn's picture

+1 This.  Spain is the bigger domino that will be the true tipping point, unleashing a cascade of serial fucked-ed-ness.  The UK has exposure to Spain through Santander.  I believe Santander is the bank to watch in Spain.

FEDbuster's picture

"Hey Ben this is Dave Tepper. You know the guy who said buy stocks "balls to the wall" on CNBC.  You still buying bonds?  Have I got a bond for you...."

whatsinaname's picture

What goes around come around ?

The big unzip's picture

Everything is still O.K., unless its not.

DoChenRollingBearing's picture

+ 1 Yes

That is why everyone should be preparing starting yesterday.

Mr Lennon Hendrix's picture

"Bernanke was god of earth for five years" will be written on his tombstone.

Boris Alatovkrap's picture

No, is Satan pretend to be God. Failure of proportional epic.

kaiserhoff's picture

Ve haf message for you, Boris, from womanski vat lofs you chin viskers.

Trouble is, ve don't know if it's in Rooskie or Klingon.

kaiserhoff's picture

Must be rooster.  Methinks she vants to be your Dixie Chicken.

Damn Google transmangleration machine...

Boris Alatovkrap's picture

When Boris is paste Kaiser's prose in Google Translate, is get only gibberish. Please elevate and to re-post.

Piranhanoia's picture

It can't be insolvent.  It will mean the other Spanish banks are, and Italy, and France, and Germany, and Denmark, Norway, UK, Japan,  US....

Please move slowly to the lifeboats.  Women and Children first,  then Red Indians, and spacemen, and a Flemish Merchant of the 15th century......

Bunga Bunga's picture

Geesh, we are all in central planning now, forget about market rules. 

Boris Alatovkrap's picture

When only tool is hammer, everything is look like nail. But when only tool is hand drill, beware, everything is get screwed.

Bunga Bunga's picture

When only tools around are hammer and sickle, you know where you ended up.

Boris Alatovkrap's picture

Why is Soviet choose for Hammer and Sickle? Some is believe falsity for "Industry and Agriculture", but is truth told, mean citizen is subject to pounding by state, or, if refuse, is cut off like shaft of wheat. In Amerika, if Bernanke is hammer, DHS & ATF is sickle, no?

ParkAveFlasher's picture

Shit just got REYAL.

Whiner's picture

That "eight million sq meters of undeveloped land" ought to liquidate out quickly at a nice price leaving the Lender a profits bonanza in the 888 residential properties. The timely sales of future commercial properties will be gravey on top of the icing! Is it too late to buy stock in the Bank?

buzzsaw99's picture

jooz never looz. a 747 could fly into the side of his building and he would make a profit.

Al Huxley's picture

Actually, 767, but point taken.

Yen Cross's picture

  I'm sure "Super Mario", is all over this one. heavy<sarc>  Fuck off you pussy euro libtards! You know I speak the truth! I like most Europeans, but you cock smuggling Euro Trash/ Dollar swapping assholes can suck my "Chocolate Starfish"!

  Here is a good read . The bank that broke Spain -  old news but informative...

donsluck's picture

I'm glad to read your diatribe. I've been thinking that the EU is STRONGER than the US because their central bank does not belong to any one country and has only one mandate. In fact, it may end up taking over from the US as the "safe harbor".

q99x2's picture

People from Pittsburgh are special. Tepper is no exception. Pittsburghers call in to Coast to Coast am more than any other callers. The original zombie movie Night of the Living Dead was filmed 6 miles from where I grew up. They speak with thier own dialect. In the 70's a small town 20 miles North of Pittsburgh had the largest drug use per capita rating of any other US city second only to Anarbor Michigen. I predict Pittsburgh will one day rise up and conquer the world. As gateway to the West the Carnegies, Mellons, Fricks and others had their fortunes centered in Pittsburgh. I am still the proud owner of a Terrible Towel. Carefoolest what thou Sayest about the People from Pittsburgh. I have to admit though, it is a good place to be from. Beautiful place to visit in the Spring and Fall.

lasvegaspersona's picture

everywhere is beautiful to visit in the Spring and Fall

fuck the Midwest from the coast to the Rockies (well to within 50 miles of the Rockies) From there to the California border you have gods country, at the border you must give up you soul to proceed...but the scenery is nice...

MFLTucson's picture

Now we know why the US stock market made an all time high today!  this is a fuckin con game and the world is watching the most courrpt finacial circus on the planet in full view!

Cursive's picture

I'm so jaded at this point that I'm trying I'm thinking Tepper will sell it to the Fed or something.  I know that sounds stupid, but SPX 1530....

youngman's picture

"Many loans were refinanced one or two years ago, in the hope that things would get better, but it has not been the case and there is now more realism about the situation. Why would you extend a new loan today?"


Do you think they are starting to get way...

Mr Lennon Hendrix's picture

UE will rise because of this.  So what is their rate now?  40% unemployed?

Well, as long as equities are higher, right Greenspan?

Blond Viking's picture

Newspapers and sites like ZH give us the big picture. But sometimes a snapshot (like the photo from the Greek central bank) can say much more than so many analyses. The text below is one of those snapshots. Originally published as a reader comment on Swedish financial daily, I thought it was so good I saved it and translated it into English for wider distribution. This is what a Scandinavian living on the Costa del Sol has to say:


“The banks are on the verge of bankruptcy. They don’t have any money left. They have tens of thousands of flats and construction projects estimated at fantasy amounts on their balance sheets.


A lot of these objects are impossible to sell and have a negative value since demolition is the only option. The rest may have a maximum market value of 20% of the book value.


The banks cannot sell since this would force them to lower their prices and the whole house of cards comes tumbling down.


I have a flat on the Costa del Sol, in a complex where the banks own roughly 80%. Those who bought their flats desperately want to sell, since the whole area is decaying. The banks do not pay the maintenance fees, and have not done so since 2008, in the hope of shifting these accumulated costs onto future buyers. Private buyers who once paid cash and are trying sell have lowered their prices to EUR 30-50,000, but nothing much is happening. The banks have their flats for sale for the same price as in 2007, app. EUR 200,000, otherwise their balance sheets will crash. Those who bought with mortgages have long since stopped paying the banks and have abandoned their flats. Many of those who have left did not even empty their pantries and fridges, so the places are full of vermin and cockroaches.


During the golden years a lot of people from South America came to Spain, got jobs, bought houses and flats with mortgages of 110%, no problem. They were the first to abandon their houses and flats and left Spain. Subsequently many other foreigners and Spaniards have abandoned their overleveraged houses and properties.


Up until 2007, thousands of very poor quality houses and flats were built along the coasts. The aim was to build as much as possible in as short a time as possible, sell fast and make a pile of cash. Now, after a couple of years, it turns out that some of these buildings were constructed on foundations that shift and/or move, so the houses are falling apart all on their own. I have seen examples of people who have paid their life savings for their dream house and after a couple of years they are banned by the authorities from going anywhere near them. It is too dangerous since they have ten-inch cracks and are falling apart.


The banks have also lent money to thousands of houses that were constructed without building permits, where local authorities demand demolition. These negative value properties also have fantasy valuations in the banks’ books.


The banks have lent money to practically anything, with incompetent bank employees granting loans of 150% of a fictitious, out-of-proportion value (since all prices would continue to rise in all eternity and the envelope with the 5% kickback does wonders). Building permits and things like that could just be ignored. Faked building permits could always be bought from local civil servants, if necessary.


The Spanish real estate market is an utter morass, a complete disaster that few people realise the full scope of. Reality is scary, with banks and a building trade that have acted in hair-raising ways. The real deficits in the banks are gigantic, of Biblical proportions!


And the banks have desperately hoped that the market would turn around and a miracle would happen. But miracles don’t happen often and now reality has caught up.


So the Spanish state, which is bankrupt, is going to refinance a bankrupt banking system with money from northern Europe’s tax payers via the ECB?


Somebody has to put a stop to this!”




kliguy38's picture

seems like a bargain to me. Cockroaches at bargain basement prices. I guess International House Hunters better start looking in the cabinets a little closer. Could be more entertaining.

Miss Expectations's picture

"I have seen examples of people who have paid their life savings for their dream house and after a couple of years they are banned by the authorities from going anywhere near them. It is too dangerous since they have ten-inch cracks and are falling apart."

If you want to you can compare the falling of our empire(s) to that of Rome.  But, some of the ancient aqueducts are still in use and you can still walk the Via Appia.  So, there's that.

Al Huxley's picture

Yes, but the thing your missing is that this is what all the fucking central bank printing is all about - making banks whole after their shitty investments in overpriced real estate go bust.  Well, that and making governments whole when they spend more than they make.  Either way, our central banker overloads have our backs, we can all rest easy knowing our fate is in their capable and caring hands.  Our good shepards will look out for us, we can all go back to watchin' the TV.

Rustysilver's picture


Must places are good to be from. It's the places that you want to be at right now that are at premium.

falak pema's picture

capitalism at its best; natural selection. One down. A hundred to go.

lasvegaspersona's picture

pema pema pema

new rules...the new DNA in capitalism allows all connected entities to live forever.  glory glory glory

Bunga Bunga's picture

Real selection would be hanged banksters, but tax payers will save their fat asses again.