Dubai group is offering Colonial

By Leslie Crawford in Madrid

Published: February 28, 2008 03:23 | Last Updated: February 28, 2008 03:23

Investment Corporation of Dubai on Wednesday, made a non-binding offer for Inmobiliaria Colonial who appreciated the troubled Spanish real estate group at just under € 3 billion ($ 4.5bn).

Less than a year, the market capitalization Colonial was € 9.5 billion, but the international financial crisis hit the market valuation of Spanish real estate. The crisis subprime mortgages in the United States has also dried up funding for the sector.
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Global property sector feels the heat - Jan-04

Colonial was effectively put up for sale earlier this year because of debts accumulated by the major Colonial's principal shareholders, who have increased their holdings in the company in an attempt to stave off the collapse in the share price of Colonial last year .

CIM gave Colonial two major shareholders - Luis Portillo, a former president, and the family Nozaleda - 48 hours to accept its terms. Mr. Portillo Nozaledas and control of 52 percent of the company. CIM said it would make a bid for Colonial once it has "at least 50.1 percent" of the group.

Colonial's stock price has dropped by 7.7 per cent to close at € 1.57 as traders said they were not expecting a counter-offer. However, the process is far from complete.

CIM, which includes the Government of Dubai of commercial assets, said the offer was conditional on refinancing agreements had been reached with four international banks that hold more than 90 percent of Colonial € 8 billion of debt.

Royal Bank of Scotland, Eurohypo, Calyon and Goldman Sachs last year arranged a € 7.2 billion syndicated credit Colonial allow for the acquisition of two other groups of real estate in Spain. Goldman Sachs also funded the Colonial 15 percent of the capital of FCC, a Spanish construction group, which it acquired for € 1.6 billion. It's worth playing just above € 800 m today, which means Colonial sits on a capital loss on this investment.

Analysts said Goldman Sachs could withstand the conditions offered by the Group in Dubai. Goldman could not be reached for comment Wednesday.

The group of Dubai is offering to pay for Colonial party in cash and partly in its own obligations. CIM provides € 1.85 share in cash, but the group said "at least 50 percent of the price" would be paid in zero-coupon bonds worth € 2.25 at hand, following the purchase of four and a half years.

If the deal is achieved, Colonial would be the first major investment outside the United Arab Emirates for the ICD.

Colonial took a lot of debt last year to finance its expansion at the height of Spain property boom. But the end of this growth has made it more difficult for the Colonial to sell assets to pay its debts.