Spanish market fails to attract new lenders

Core investors like insurers and private equity houses are becoming more willing to provide financing in the larger, stable markets of Western Europe, but Spain remains an exception, Jesus Varela, partner and head of Real Estate Spain at law firm Salans told the PropertyEU Debt Finance Investment Briefing at Expo Real. ‘In terms of senior debt, the origination to distribution game over. We’re not seeing any new syndication or loans in Spain. There’s no room for new lenders,’ he noted.

Foreign investors are primarily interested in buying distressed debt at a discount, he added. Since 2008, his firm has concentrated on providing advisory services on restructuring and refinancing, but the Spanish market appears to have reached a deadlock as international and Spanish banks come to terms with the prospect that their debt will not be repaid in full. For their part, opportunistic private equity players funders expect high returns due to their high cost of capital which explains their low price offers.

But the game of pretending and extending is coming to an end, Varela said, pointing to moves by international and Spanish banks to retrench from the real estate financing sector. The new reality that they must now face is that some of the assets on their balance sheets will never be refinanced, he added: ‘We are waiting for a tipping point or a trigger, something that will change the market, like a bad bank or a total bailout. But the reality is that we are witnessing a very slow landing from the peak of the bubble.'

The full report on the Debt Finance Investment Briefing appears in the November issue of PropertyEU. Click on the link below to subscribe: