Shaky foundations

The covenant breach constitutes a technical default on the €912.5m debt package put in place in a 2007 dividend recap, arranged through bookrunner ING.

Neither Terreal nor sponsor LBO France sought a waiver consent prior to the breach of covenants. Senior debt is now trading in the 5 to 10 range in the secondary market. Terreal was recapitalised in June 2007 – one of the last deals launched ahead of the credit crunch.

Spanish property company Habitat filed for administration on Friday, with €2.3bn of debt outstanding.

Chairman Bruno Figueras said in a statement that the company remained viable: “It has high-value assets backing up the business and giving it solidity,” he said.

BAA owner Ferrovial holds a 20% stake in the company.

Listed rival Colonial said it could face going into administration if it failed to complete disposals and a bond issue agreed under a €6.5bn debt restructuring earlier this year.

Calyon, Eurohypo, Goldman Sachs and RBS arranged a €6.4bn loan for the group in 2007, which the same lenders restructured as a €6.5bn facility in September this year.

The agreement means Colonial needs to sell some or all of its Riofisa subsidiary and stakes in construction groups FCC and SFL, as well as completing a €1.405bn convertible bond issue.

A failing to offload the stakes could see Colonial agree some form of debt for equity swap with the banks, who have a call option on the FCC and SFL stakes that can be exercised between December 11 and January 10 next year.

Shares in Taylor Wimpey rose last week, on speculation that the struggling housebuilder could see resolution of its refinancing issues via some form of debt for equity swap. It might even see equity owners realise some value.

Shares rose from an all-time low closing price of 4.4 pence per share on November 25 to end the week at 11 pence. This contrasts with levels of more than 500 pence per share in May last year, before the collapse in housing demand caused the stock to plummet.