It turns out sovereign wealth funds can walk away from deals – and swiftly.
Less than a week after it tabled an offer for troubled Spanish property group Inmobiliaria Colonial, the Investment Corporation of Dubai has turned on its heel.
The offer, pitched at €1.85 a share in cash or paid in ICD’s zero coupon bonds worth €2.25 at maturity, valued the group at just below €3bn. Some come-down for the group, worth €9.5bn a year ago but which hit trouble as Spanish property valuations came under pressure, prompting its main shareholders to build up large debts increasing their stakes in the business. The share price slumped in December after forced selling amongst investors, who backed an equity issue last summer through a complex swap arrangement that has since unravelled.
It seems that those shareholders, Luis Portillo, former chairman, and the Nozaleda family, couldn’t reach agreement with the ICD.
ICD also wanted the approval of Colonial’s creditor banks, RBS, Eurohypo, Calyon and Goldman Sachs, which last year arranged a €7.2bn syndicated credit to allow Colonial to acquire two other real estate groups in Spain. The group has already breached its covenants.
Those banks now need to find another buyer for the business – and sharpish. They face the prospect of having the Spanish property mess reflected on their books.
So is Dubai playing tactics? The market has rather doubted the ability of Dubai to get its deal done, with the shares falling ever further since the offer was made last week. Colonial shares dropped another 11 per cent on Tuesday, trading at €1.10 a share. But the share price falls have also reflected the absence of other interested parties in this rescue mission, and the seeming dearth of alternative routes for Colonial’s beleaguered backers.
Related links
Dubai group makes Colonial offer – FT.com
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