In Spain, a Debt Crisis Built on Corporate Borrowing

In a country with one of the highest levels of company debt in the world, few businesses in Spain shoulder as big a burden as Grupo A.C.S., global construction giant whose debt woes have become a mirror image of Spain’s own increasingly severe financial struggle. Saddled with a 9 billion euro ($11.7 billion) debt pile that is twice the size of the company’s shrinking market value, A.C.S. is in the midst of a frantic campaign to sell off assets, pay down debt and further distance itself from a Spanish economy caught in a spiral of austerity, deflation. Spanish government’s harsh budget cuts and their depressive effect on the economy have prompted foreign investors to sell Spanish stocks and bonds in droves. On Tuesday, Spanish stocks plunged 2.8 percent and the government’s 10-year bond yields spiked to 6 percent as Spain moved to bail out its ailing banks, and uncertainty over Greece loomed. But economists now say that one of the greatest threats to Spain could well be the snarl of debt choking off the growth prospects of A.C.S. and other highly indebted Spanish corporations. And they warn that as these companies cut back on investments and shed assets as well as jobs, the result could be a Japan-style lost decade of stagnation. An important metric in the eurozone debt crisis has been government debt as a percentage of the total economic output, and Spain has a relatively low ratio of 70 percent, compared with 165 percent for Greece and 120% for Italy. But according to a recent report by McKinsey on global debt, Spain’s nonfinancial private sector debt is 134 percent of gross domestic product, higher than any major economy in the world with the exception of Ireland, where the figures are skewed by the outsize presence of foreign multinationals. Factoring in bank, household, government obligations, total figure rises to 363% of GDP, trailing only Japan at 512% and Britain at 507%. “The problem in Spain is not government debt, it’s private sector debt,” said Jonathan Tepper of Variant Perception, a London-based research boutique with a specialty in Spain. “A.C.S. perfectly captures this problem.” Under stewardship of its ambitious chairman, ACS, like many other corporations in Spain during the recent boom, gorged on cheap debt, seeking to diversify by buying large equity stakes in companies in Spain and elsewhere. In a bull market, this web of cross-holdings held in special-purpose vehicles and financed by bank loans can sustain a vast corporate appetite. But when the assets backing these debts plunge, banks call in their loans, opposite can occur. “It is a really bad time for these companies,” said Mauro Guillen, an expert on Spanish multinational companies at the Wharton School of the University of Pennsylvania. “Government is no longer investing in infrastructure, municipalities are no longer paying their bills, companies are in constant need of refinancing. So they have to unload their positions to raise cash.” With 28 billion euros in revenue, A.C.S, is one of the largest building services companies in the world. Its projects range from building subway stations in Manhattan and managing toll roads in Florida, to collecting waste in France and building wind farms in Brazil (…..)

Link: http://www.nytimes.com/2012/05/10/business/global/in-spain-grupo-acss-high-debt-reflects-countrys-finances.html

Acerca de ignaciocovelo
Consultor Internacional

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