LONDON, Oct 5 (Reuters) - A battle over the shares of French property firm Gecina is about to begin after their 31 percent owners, Alteco and Mag Import, filed one of the biggest bankruptcy actions in Spanish history this week.
The filing came after lenders to Alteco, owned by former Gecina chairman Joaquin Rivero, would not agree to extend and refinance a 1.6 billion euro ($2 billion) syndicated loan, which was put in place in 2006 with an original size of 2.16 billion euros and a 2011 maturity.
Since 2010, Alteco's banks, which include Spanish banks as well as Natixis and Royal Bank of Scotland , agreed to various maturity extensions on the debt, but in the last few months banks were getting impatient with the negotations of new terms for another extension, people close to the process said.
The negotiation failed mainly because Alteco was unable to meet one out of three conditions imposed by the banks, namely to get a French judge to lift an embargo on Rivero receiving dividends from Gecina, which would have helped make payments on the loan, the people added.
RACE IS ON
The race is now on between Rivero, who is keen to keep hold of Gecina, and banks that are eager to take control of the 31 percent stake in the real estate firm through an enforcement on the shares. Banks will be looking to seize the stake, valued at around 1.5 billion euros, in order to sell and use proceeds to repay the loan.
Two Spanish legal experts said that they are of the opinion that the banks could enforce on the Gecina share pledge outside of the Spanish insolvency before the Spanish court freezes the Gecina assets, which should occur once the court accepts the Alteco and Mag's bankruptcy filing next week.
"The pledge is subject to regulations that allow an enforcement on the shares in the company outside Spanish insolvency, but they would have to do it quickly," one of the lawyers said.
"If I were in Rivero's position, I would ask the court as soon as possible to put measures in place to avoid the enforcement of the shares by the banks."
It is unclear if the banks have initiated an enforcement proceeding already, but lenders are taking legal advice on it, the sources said.
Once the court approves Alteco's and Mag's bankruptcy and receivers are appointed, the court will likely freeze Gecina's assets and it will be more difficult for banks to seize the shares, and subsequently receive their money back.
Rivero will then most likely ask the court to start negotiating a new refinancing plan with lenders, the people said. Under the Spanish insolvency law - concurso - debtors can negotiate an agreement that will require approval of either a straight majority of lenders or 51 percent if debt deferrals are over three years. The process can take between 6 to 18 months. ($1 = 0.7657 euros)
(Reporting by Isabell Witt in London, Tracy Rucinski in Madrid and Christian Plumb in Paris; Editing by Chris Mangham.)