Spanish Toll Roads
Madrid Court Orders R-3/R-5 Shareholder Guarantors to Pay €450M in Sponsor Guarantees to Creditors; Sponsors ACS, Sacyr, Abertis to Appeal Decision
Mon 12/20/2021 06:34 AM
Relevant Documents:
Nov. 17 Clarification of Ruling (in Spanish)
Nov. 2 Ruling (in Spanish)
Madrid’s Court of First Instance No. 26 has ordered Radial 3 and Radial 5 shareholder guarantors Abertis, ACS and Sacyr to pay €450 million in sponsor guarantees to the syndicated creditors’ agent Haitong Bank, according to a court ruling.
The sponsors will appeal the court’s decision, sources told Reorg. This ruling is the first of its kind to be successful, after a Madrid court rejected a claim for the sponsor guarantee filed against the shareholders of the AP-41 toll road concession on May 11.
Alazor Inversiones is the sole shareholder of concession manager Accesos Madrid that manages the R-3 and R-5 toll roads. Both concessions were liquidated in November 2017, as reported. At the time, their joint debt was about €650 million. The R-3 and R-5 toll roads carried a sponsor guarantee worth more than €1.2 billion, sources said.
As part of the original concession contracts, some toll road sponsors pledged to provide creditors with guarantees that covered up to 100% of the concession’s debt and/or additional expenses with land expropriation or construction costs, depending on the terms of each individual contract. The sponsor guarantee made the roads more palatable to investors, as reported. In this case, the sponsors are three large Spanish construction groups (ACS, Abertis and Sacyr), and the shareholders of the concessions are subsidiary companies used to directly manage concessions.
In 2017 and 2018, Accesos Madrid’s debt was quoted the highest out of the nine Spanish insolvent concessions, having reached a peak quote of 83-85 in summer 2017, as reported. The concession’s debt valuation was partially due to the sponsor guarantee attached to the roads and €677 million in compensation for early termination of contract (responsabilidad patrimonial de la administración, or RPA) stipulated in the original concession contract.
In November 2020, the Spanish government set the R-3 and R-5’s RPA at “zero euros,” as outstanding costs for construction and land expropriation, which have been serviced by the state, surpassed the €430.1 million of RPA amount due, according to Spain’s calculations.
The Ruling
The claim over the sponsor guarantee was filed in February 2019, the court document states. Judge Francisco Javier Just Bauluz decided on the matter following several hearings with the parties, and provided an additional clarification ruling on Nov. 17 after both claimants and defendants filed complaints over procedural errors in the original ruling.
Claimant Haitong Bank is representing creditors Taconic, SVP, Attestor, Deutsche Bank and state-backed Instituto de Crédito Oficial, which jointly hold €560.1 million of the roads’ debt, the ruling states.
The R-3 and R-5’s concessions’ shareholders are Desarrollo de Concesiones Viarias Uno (23.62% stake, owned by ACS), Iberpistas (31.22% stake, owned by Abertis), Sacyr (25.16%) and Bankia (20%).
Judge Just ruled that the sponsors have to repay €450.1 million in sponsor guarantees proportionally to their stake in the concessions, as follows:
Claimants were asking the court for €562.6 million in compensation, which was granted by the court, minus a sum of €112.5 million corresponding to Bankia’s share, according to the ruling.
The court also ordered the shareholders to pay accumulated interest payments since Dec. 21, 2018, statutory default interest, as well as three quarters of the litigation costs, to be paid equally by the shareholders, the ruling states.
Despite being a shareholder, Bankia has not been ordered to make any payments to creditors by the court, as it reached a separate deal with Haitong in 2020. The lender group settled their claim with Bankia for under €250 million.
Judge Just upheld Haitong’s claim by arguing that the defendants had been in breach of the sponsor contract. He considered that the roads’ shareholders breached clause 4, subsection viii, of the sponsor guarantee contract, which determined that Alazor’s shareholders are obliged to pay creditors “an amount equal to the part of the subordinated credit not reimbursed by Accesos Madrid to Alazor and corresponding to amounts paid or to be satisfied by Acessos Madrid to creditors to subordinated creditor or creditors of similar rank.” This sum would be used to cover Alazor’s outstanding debt.
Under the contracts’ terms, creditors would be able to activate the clause in the event of Accesos Madrid’s dissolution, liquidation, provisional or definitive insolvency or similar procedure, or in the case of termination of the concession.
Haitong Bank was represented by Jesús Almoguera Abogados, Bankia retained an in-house lawyer and the creditors were counseled by Garrigues, according to the ruling.
Appeals
On Nov. 4, Abertis said that Iberpistas and ACESA will appeal Judge Just’s ruling, according to a release. The Spanish construction company said that “there are solid legal grounds to sustain that this ruling may be revoked” in appeal, and that the amount the court ordered Abertis to pay was fully provisioned.
During the presentation of its ACS’ third-quarter results, the company’s management echoed Abertis’ statement, saying that the company was hopeful that the ruling would be reversed on appeal. Additionally, management said that the €132.88 million payment was provisioned.
In a call to present third-quarter results, Sacyr’s CEO Manuel Manrique told investors that the Madrid Court ruling was “part of a global dispute involving shareholders, the [creditor] funds, and the public administration concerning the construction of these Radial roads,” and that this first instance ruling just “accounts for just one event in a very lengthy process.”
Essentially, Manrique said, the goal is to “determine who is going to be responsible for paying the relevant liability” once the RPA calculations are settled, and that “opportunistic funds” are using different legal procedures “to anticipate the recovery of this debt without waiting for the final procedure to be finalized.”
Manrique said Sacyr has “generic provisions” for short-term impact costs, and that the company believes this ruling will not have a significant impact on its accounts.
Background
In September 2017, Madrid’s Provincial Court No. 20 overruled two court sentences that ordered R-3 and R-5 sponsors Abertis, Bankia, ACS and Sacyr to provide a €372 million sponsor guarantee on the concessions’ debt, effectively ordering lenders who received payment from the concessions’ shareholders to return the amount with interest.
At the time, the court ruled that the sponsor guarantee was not legally executed, as payments, negotiated directly with the benefited lenders, should have been done through an agent and been approved by a two-third majority of creditors. Lenders repaid the amount, and started over with the process to establish the sponsor guarantee, leading up to the Nov. 2 ruling.
In July 2020, Reorg reported that toll road lenders SVP, Taconic, King Street and Attestor were launching legal actions to claim an estimated €2.2 billion in sponsor guarantees. The creditors asked sponsors to honor the guarantees and, in exchange, the shareholders would take the creditors’ place as beneficiaries of the expected €3.3 billion in state compensation payments, or RPA.
Spain’s nine insolvent toll roads filed for liquidation between 2015 and 2018 and were returned to the state, under Spain’s Sociedad Estatal de Infraestructuras del Transporte Terrestre.
The concessions have a joint total debt of about €3.7 billion. In May 2019, the Spanish government said that total RPA payments across all toll roads would be limited to a maximum of €3.3 billion.
The distressed assets comprise Madrid radial roads R-2 Madrid-Guadalajara, R-3 Madrid-Arganda, R-4 Madrid-Ocaña and R-5 Madrid-Navalcarnero, plus freeways AP-41 Madrid-Toledo, AP-36 Ocaña-La Roda and M-12 Eje Aeropuerto Barajas, along with two sections of the AP-7 road, Cartagena-Vera and Circunvalación de Alicante.
A summary snapshot of all of the liquidated toll road concessions is below:
--Laura Vilaça
Nov. 17 Clarification of Ruling (in Spanish)
Nov. 2 Ruling (in Spanish)
Madrid’s Court of First Instance No. 26 has ordered Radial 3 and Radial 5 shareholder guarantors Abertis, ACS and Sacyr to pay €450 million in sponsor guarantees to the syndicated creditors’ agent Haitong Bank, according to a court ruling.
The sponsors will appeal the court’s decision, sources told Reorg. This ruling is the first of its kind to be successful, after a Madrid court rejected a claim for the sponsor guarantee filed against the shareholders of the AP-41 toll road concession on May 11.
Alazor Inversiones is the sole shareholder of concession manager Accesos Madrid that manages the R-3 and R-5 toll roads. Both concessions were liquidated in November 2017, as reported. At the time, their joint debt was about €650 million. The R-3 and R-5 toll roads carried a sponsor guarantee worth more than €1.2 billion, sources said.
As part of the original concession contracts, some toll road sponsors pledged to provide creditors with guarantees that covered up to 100% of the concession’s debt and/or additional expenses with land expropriation or construction costs, depending on the terms of each individual contract. The sponsor guarantee made the roads more palatable to investors, as reported. In this case, the sponsors are three large Spanish construction groups (ACS, Abertis and Sacyr), and the shareholders of the concessions are subsidiary companies used to directly manage concessions.
In 2017 and 2018, Accesos Madrid’s debt was quoted the highest out of the nine Spanish insolvent concessions, having reached a peak quote of 83-85 in summer 2017, as reported. The concession’s debt valuation was partially due to the sponsor guarantee attached to the roads and €677 million in compensation for early termination of contract (responsabilidad patrimonial de la administración, or RPA) stipulated in the original concession contract.
In November 2020, the Spanish government set the R-3 and R-5’s RPA at “zero euros,” as outstanding costs for construction and land expropriation, which have been serviced by the state, surpassed the €430.1 million of RPA amount due, according to Spain’s calculations.
The Ruling
The claim over the sponsor guarantee was filed in February 2019, the court document states. Judge Francisco Javier Just Bauluz decided on the matter following several hearings with the parties, and provided an additional clarification ruling on Nov. 17 after both claimants and defendants filed complaints over procedural errors in the original ruling.
Claimant Haitong Bank is representing creditors Taconic, SVP, Attestor, Deutsche Bank and state-backed Instituto de Crédito Oficial, which jointly hold €560.1 million of the roads’ debt, the ruling states.
The R-3 and R-5’s concessions’ shareholders are Desarrollo de Concesiones Viarias Uno (23.62% stake, owned by ACS), Iberpistas (31.22% stake, owned by Abertis), Sacyr (25.16%) and Bankia (20%).
Judge Just ruled that the sponsors have to repay €450.1 million in sponsor guarantees proportionally to their stake in the concessions, as follows:
| Shareholder | Sponsor | Amount to Pay (€M) |
| Desarrollo de Concesiones Viarias Uno | ACS | 132.88 |
| Iberpistas | Autopistas C.E.S.A. (Abertis) | 175.64 (guarantor to pay only half of this amount, as per the terms of the original concession contract) |
| Sacyr | Sacyr Construcción / Sacyr Concesiones | 141.54 |
Claimants were asking the court for €562.6 million in compensation, which was granted by the court, minus a sum of €112.5 million corresponding to Bankia’s share, according to the ruling.
The court also ordered the shareholders to pay accumulated interest payments since Dec. 21, 2018, statutory default interest, as well as three quarters of the litigation costs, to be paid equally by the shareholders, the ruling states.
Despite being a shareholder, Bankia has not been ordered to make any payments to creditors by the court, as it reached a separate deal with Haitong in 2020. The lender group settled their claim with Bankia for under €250 million.
Judge Just upheld Haitong’s claim by arguing that the defendants had been in breach of the sponsor contract. He considered that the roads’ shareholders breached clause 4, subsection viii, of the sponsor guarantee contract, which determined that Alazor’s shareholders are obliged to pay creditors “an amount equal to the part of the subordinated credit not reimbursed by Accesos Madrid to Alazor and corresponding to amounts paid or to be satisfied by Acessos Madrid to creditors to subordinated creditor or creditors of similar rank.” This sum would be used to cover Alazor’s outstanding debt.
Under the contracts’ terms, creditors would be able to activate the clause in the event of Accesos Madrid’s dissolution, liquidation, provisional or definitive insolvency or similar procedure, or in the case of termination of the concession.
Haitong Bank was represented by Jesús Almoguera Abogados, Bankia retained an in-house lawyer and the creditors were counseled by Garrigues, according to the ruling.
Appeals
On Nov. 4, Abertis said that Iberpistas and ACESA will appeal Judge Just’s ruling, according to a release. The Spanish construction company said that “there are solid legal grounds to sustain that this ruling may be revoked” in appeal, and that the amount the court ordered Abertis to pay was fully provisioned.
During the presentation of its ACS’ third-quarter results, the company’s management echoed Abertis’ statement, saying that the company was hopeful that the ruling would be reversed on appeal. Additionally, management said that the €132.88 million payment was provisioned.
In a call to present third-quarter results, Sacyr’s CEO Manuel Manrique told investors that the Madrid Court ruling was “part of a global dispute involving shareholders, the [creditor] funds, and the public administration concerning the construction of these Radial roads,” and that this first instance ruling just “accounts for just one event in a very lengthy process.”
Essentially, Manrique said, the goal is to “determine who is going to be responsible for paying the relevant liability” once the RPA calculations are settled, and that “opportunistic funds” are using different legal procedures “to anticipate the recovery of this debt without waiting for the final procedure to be finalized.”
Manrique said Sacyr has “generic provisions” for short-term impact costs, and that the company believes this ruling will not have a significant impact on its accounts.
Background
In September 2017, Madrid’s Provincial Court No. 20 overruled two court sentences that ordered R-3 and R-5 sponsors Abertis, Bankia, ACS and Sacyr to provide a €372 million sponsor guarantee on the concessions’ debt, effectively ordering lenders who received payment from the concessions’ shareholders to return the amount with interest.
At the time, the court ruled that the sponsor guarantee was not legally executed, as payments, negotiated directly with the benefited lenders, should have been done through an agent and been approved by a two-third majority of creditors. Lenders repaid the amount, and started over with the process to establish the sponsor guarantee, leading up to the Nov. 2 ruling.
In July 2020, Reorg reported that toll road lenders SVP, Taconic, King Street and Attestor were launching legal actions to claim an estimated €2.2 billion in sponsor guarantees. The creditors asked sponsors to honor the guarantees and, in exchange, the shareholders would take the creditors’ place as beneficiaries of the expected €3.3 billion in state compensation payments, or RPA.
Spain’s nine insolvent toll roads filed for liquidation between 2015 and 2018 and were returned to the state, under Spain’s Sociedad Estatal de Infraestructuras del Transporte Terrestre.
The concessions have a joint total debt of about €3.7 billion. In May 2019, the Spanish government said that total RPA payments across all toll roads would be limited to a maximum of €3.3 billion.
The distressed assets comprise Madrid radial roads R-2 Madrid-Guadalajara, R-3 Madrid-Arganda, R-4 Madrid-Ocaña and R-5 Madrid-Navalcarnero, plus freeways AP-41 Madrid-Toledo, AP-36 Ocaña-La Roda and M-12 Eje Aeropuerto Barajas, along with two sections of the AP-7 road, Cartagena-Vera and Circunvalación de Alicante.
A summary snapshot of all of the liquidated toll road concessions is below:
(Click HERE to enlarge.)
--Laura Vilaça
This article is an example of the content you may receive if you subscribe to a product of Reorg Research, Inc. or one of its affiliates (collectively, “Reorg”). The information contained herein should not be construed as legal, investment, accounting or other professional services advice on any subject. Reorg, its affiliates, officers, directors, partners and employees expressly disclaim all liability in respect to actions taken or not taken based on any or all the contents of this publication. Copyright © 2024 Reorg Research, Inc. All rights reserved.