Trade Alert - January 2014, Issue 1


Many distressed investors are seeking returns from real estate and other investment opportunities in Spain. 
What could go wrong?

Stamp Duties – 0.5% - 1.5%. Stamp duties apply to the secured transfer amount secured by registrable security interests and can kill profit i.e. the loan is 100% secured, duty is payable at the applicable rate x the face amount of the traded portion (irrespective of price). The rate depends on the region (Comunidad Autonoma) where the secured property is located, e.g., 1.5% in Barcelona and 0.75% in Madrid. To be taken into account when pricing.  If you are not resident in a Treaty State, withholding tax of 21% on interest payments may apply.

Equitable Subordination – the risk you can’t see. If you buy a Spanish loan in the secondary LMA Market you will likely never know or be able to determine through due diligence who the original lender was at the signing of the loan. If that lender is an “especially related” person to the borrower, under Article 92 and 93 of the Spanish Insolvency Act, you may find your loan becomes equitably subordinated on the borrower’s insolvency. Equitable subordination risk travels with the debt so, ask for a representation!  

Proprietary rights are ancillary to the debt
– what does this mean?  English law transfers by novation may risk losing your rights to security in a Spanish insolvency process and you could become an unsecured creditor. Transfers in Spain should be by assignment and mortgage security is required to be registered in the name of the Buyer to allow enforcement.

Voting rights
– may not be transferred to a fund post filing for insolvency in Spain unless the fund is “an entity subject to financial supervision” (entidad sometida a supervisión financiera). Debt acquisitions are often structured through Luxco or Irish special purpose vehicles, which are generally not entities that are subject to financial supervision and it is not sufficient for the investment manager to be regulated. Therefore settlement by participation would preserve the vote but dilute the buyer’s rights as directions will be subject to majority participant decision.

Special Note: Thanks to Hector Bros and Beatriz Causape at Cuatrecasas for their assistance with the Spanish Jurisdiction Update.

Notable Transactions

  1. RESCAP - $3bn claim
  2. CODERE S.A. - €1.1bn EU restructuring
  3. Shippping Loan Portfolios (incl. PROJECT WHITE II-$600m)
  4. Spanish Real Estate Portfolios - from Lloyds and SAREB
  5. A.T.U. - €650m restructuring
  6. Kaupthing hf. - €2bn agg. trades
  7. CYPRUS: Deposits and Shares
  8. Pass Through Swaps (loan hedge transfers)
  9. Loan trades**: Abengoa, Alteco, Biffa, Cattles, Consolis, Dubai Holding, Eitzen, FCC, Hellenic Republic, IBRC, McCarthy & Stone, Metrovacesa, Oasis Holdings, P.H.S., Saur Himes, Solarwold, Tank & Rast, Vivarte
  10. Claims trades**: Cyprus, Glitnir hf., Kaupthing hf., Icebank, Landsbanki, Lehman, MF Global

Deal Pipeline

  1. Cyprus - Trades in deposit fixed term accounts and shares are now closing. Seller representation are extensive to cover AML and sanctions risk.
  2. U.A.E - Islamic financing agreements including Murabaha structures and loans to borrowers in the U.A.E.
  3. Spain - Residential and Commercial Real Estate Loans continue to be hot property.

New Team Member

Caroline Friederichs Welcome Caroline Friederichs who joins us as a Senior Associate advising on debt and claims investments in the secondary market. Caroline is qualified in Germany and England, and is proficient in Spanish and French. Prior to joining Cadwalader, Caroline was a Senior Associate at Mandel Katz and Brosnan and has over eight years' experience.

*Advised by Cadwalder (does not include RESCAP, restructurings or portfolio transactions). DISCLAIMER - the information in this update is based upon Cadwalader transactions and is not to be relied upon as a true reflection of the secondary debt or claims market. For further information, please contact

**This is a selection of recent matters, does not reflect all transactions.

Cadwalader News

ACI Summit on Controlled Substances: Regulation, Litigation and Enforcement

Jodi Avergun is speaking at this ACI event on January 30 in Washington, DC.

Cadwalader Subscription Center