LONDON, Oct 5 (Reuters) - A battle over the shares of Frenchproperty firm Gecina is about to begin after their 31percent owners, Alteco and Mag Import, filed one of the biggestbankruptcy actions in Spanish history this week.
The filing came after lenders to Alteco, owned by formerGecina chairman Joaquin Rivero, would not agree to extend andrefinance a 1.6 billion euro ($2 billion) syndicated loan, whichwas put in place in 2006 with an original size of 2.16 billioneuros and a 2011 maturity.
Since 2010, Alteco's banks, which include Spanish banks aswell as Natixis and Royal Bank of Scotland , agreed tovarious maturity extensions on the debt, but in the last fewmonths banks were getting impatient with the negotations of newterms for another extension, people close to the process said.
The negotiation failed mainly because Alteco was unable tomeet one out of three conditions imposed by the banks, namely toget a French judge to lift an embargo on Rivero receivingdividends from Gecina, which would have helped make payments onthe loan, the people added.
RACE IS ON
The race is now on between Rivero, who is keen to keep holdof Gecina, and banks that are eager to take control of the 31percent stake in the real estate firm through an enforcement onthe shares. Banks will be looking to seize the stake, valued ataround 1.5 billion euros, in order to sell and use proceeds torepay the loan.
Two Spanish legal experts said that they are of the opinionthat the banks could enforce on the Gecina share pledge outsideof the Spanish insolvency before the Spanish court freezes theGecina assets, which should occur once the court accepts theAlteco and Mag's bankruptcy filing next week.
"The pledge is subject to regulations that allow anenforcement on the shares in the company outside Spanishinsolvency, but they would have to do it quickly," one of thelawyers said.
"If I were in Rivero's position, I would ask the court assoon as possible to put measures in place to avoid theenforcement of the shares by the banks."
It is unclear if the banks have initiated an enforcementproceeding already, but lenders are taking legal advice on it,the sources said.
Once the court approves Alteco's and Mag's bankruptcy andreceivers are appointed, the court will likely freeze Gecina'sassets and it will be more difficult for banks to seize theshares, and subsequently receive their money back.
Rivero will then most likely ask the court to startnegotiating a new refinancing plan with lenders, the peoplesaid. Under the Spanish insolvency law - concurso - debtors cannegotiate an agreement that will require approval of either astraight majority of lenders or 51 percent if debt deferrals areover three years. The process can take between 6 to 18 months.($1 = 0.7657 euros)
(Reporting by Isabell Witt in London, Tracy Rucinski in Madridand Christian Plumb in Paris; Editing by Chris Mangham.)