Sacyr Vallehermoso, one of the driving forces behind Spain’s decade long construction bubble, has been saved from a last minute default after oil group Repsol purchased €2.57bn of its own shares from the indebted builder.
Sacyr, which had been racing to refinance a €4.9bn bank loan used to buy 20 per cent of Repsol at the top of the market, was left with no other option but to sell half of its stake back to the company at a discount ahead of today’s deadline.
The sale of half of Sacyr’s 20 per cent stake in Repsol effectively brings to an end a 5 year running battle between the companies that cost Luis Del Rivero, the builder’s co-founder and chairman, his job, and helped destroy 90 per cent of its value from its pre-crisis peak.
Repsol, facing the possibility that Sacyr’s lending banks would seize the shares triggering a disorderly fire sale, preferred to use part of the €5.6bn of cash on its balance sheet to buy them, with the aim of selling them on to an industrial investor, or remunerating shareholders, the Spanish oil group said.
Sacyr, which sold to Repsol at €21.06 a share, or a five per cent discount to Monday’s close, said it had secured a three year extension on the €2.3bn remainder of the debt.
This would allow it to retain 10 per cent of Repsol with the hope of later erasing some of the €940m in capital losses already incurred on an investment made at an average price of €26.7 a share.
A late attempt by Sacyr, advised by Lazard, to sell half its Repsol stake to China’s Sinopec failed after time ran out to tempt the state-controlled oil company to buy before the loan expired this week.
Several banks, including Citigroup and Crédit Agricole, had demanded that Sacyr pay back all or some of the loan, prompting Sacyr to hire advisers to find a buyer willing to pay a premium over the market price for the holding.
It was not clear on Tuesday whether a small number of distressed debt investors which purchased part of the loan in the open market would be repaid alongside the dissenting banks.
Sacyr, which during Spain’s construction boom grew to become one of the country’s largest and most politically connected builders, made the large leveraged bet on Repsol in 2006 as part of a strategy to diversify its business away from construction, but fell into trouble as Repsol shares fell sharply during the financial crisis.
Sacyr shares had hit an all-time high of just less than €50 in 2007, but collapsed to a current price of about €4.36 as Spain’s domestic construction industry ground to a halt, and the builder began to suffer under the weight of the debts it had incurred.