Distressed assets investors head to Spain for restructuring plans

Rumours of a super-toxic bank have been building up in Spain ever since the conservative People’s Party won the country’s general election by landslide. According to last weekend’s Bloomberg reports,

“Spanish Prime Minister-elect Mariano Rajoy has asked for at least two papers from academics on how to create a so-called bad bank, according to two people with knowledge of the matter.

“Both proposals outline mechanisms for a state-backed agency to buy soured assets such as real estate from banks at a discount, said the people, who declined be named because the process isn’t public.”

Bank of Spain’s official figures estimate the Spanish banking sector has some €176bn of problematic real estate and construction industry-linked assets in its balance sheet, which has triggered a potent and still ongoing restructuring process. But will the restructuring wave go beyond the banking territory? Will the austerity measures of the new government give it a firm push?

Restructuring specialist Hilco thinks so, and has announced the appointment of Igor de la Sota to lead the company’s new Madrid office. Hilco Spanish branch will open in January 2012.

Paul McGowan, Chief Executive of Hilco UK says that there is a strong potential for its restructuring and investment model in the Iberian region. The group has existing operations in the UK and Germany and has set new offices in Dublin, Ireland and Toronto, Canada during this year.

Igor de la Sota added:

“The Iberian market has huge potential, particularly given the current economic conditions. Having an office in Madrid will allow Hilco to get closer to these opportunities and leverage our restructuring experience from other parts of Europe.”

Before joining Hilco, Mr de la Sota held a senior position at ING Barings in Spain. Hilco’s current investments include the Denby Pottery Group in the UK and the HMV music and DVD retail business in Canada. In 2011, Hilco successfully completed the restructuring and sale of Habitat, the pan-European furniture retailer.

Sean Ewing, who founded Absolute Capital Management and has business interests in Spain, believes public investment cuts will spark a soul-searching shock among the region’s businesses and labour force, too:

“Will they be as prepared as the Irish to accept the harsh pain that Germany incurred post-unification that has led to its emergence as a powerhouse?

“…the divide between the southern European countries, with their laid-back attitude to work, archaic restructuring and restrictive legislation, suggests the acceptance is at best remote.”