Two Spanish investment firms that own 31 percent of French property company Gecina have filed one of the biggest bankruptcy actions in Spanish history after a bank refused to refinance a 1.6 billion euro ($2.1 billion) loan.
The potential bankruptcy is the latest chapter in Spain's debt saga since its 2008 real estate crash, which forced banks to write billions of euros off property investments.
Alteco, owned by former Gecina chairman Joaquin Rivero, and peer MAG Import said they had kept up with their payments on the syndicated loan, and the refinancing effort had been supported by other banks involved.
"This is the first request for creditor protection filed in Spain when the parties were up to date on payments," the two firms said in a statement on Wednesday.
Uncertainty over the fate of the stake in Gecina, which has struggled with boardroom unrest and debt problems of its own, knocked its shares down 5 percent to 76.9 euros.
The 31 percent stake - worth about 1.55 billion euros at Tuesday's closing share price - is likely to be frozen during bankruptcy proceedings.
"Gecina's capital could now be blocked for at least 12 to 24 months," Kepler analyst Samuel Henry-Diesbach said.
Gecina said in a statement that its board of directors would be reviewing the situation. Alteco has one member on Gecina's board and MAG Import has two.
Nearly a dozen banks are involved in the syndicated loan, with Popular, Bankia, NCG, France's Natixis and Royal Bank of Scotland among those with the most exposure, sources with knowledge of the matter said.
Natixis has the most exposure to the loan at 266 million euros, while RBS - which is 82 percent owned by Britain after a bailout in 2008 - has 212 million euros tied up in the loan, a source involved in the refinancing talks said.
The source put Spanish state-owned Bankia's exposure at 234 million euros and Popular's at 264 million. Popular was the largest non-nationalised bank to fail a stress test on Spanish banks last week, forcing it into a 2.5 billion euro rights issue to bolster capital and avoid international aid.
One source said Natixis was the bank that had balked at refinancing the loan.
The bank did not comment on its role in the bankruptcy filing, but said its 266 million euro exposure to the Spanish property loans was mostly hedged.
A source close to the talks said Natixis had been "strict" during the refinancing talks, but "wasn't the only bank that didn't want to renew the credit line".
Gecina, which manages a roughly 11 billion euro portfolio of offices, residential and student housing as well as health facilities, last year launched a 1-billion euro asset sale programme to shore up its balance sheet and reduce its debt.
The company, France's biggest office landlord, underwent a boardroom shake-up in October 2011, when its CEO was dismissed over strategic differences and replaced by Bernard Michel, a former executive at French bank Credit Agricole.
This followed the resignation of Rivero, a one-time real estate magnate who was also the chairman and shareholder of Spanish property developer Metrovacesa, in 2010.
Metrovacesa, which also owns 26.8 percent of Gecina, is now controlled by Spanish banks after a debt-for-equity swap.
"Gecina is already being run in a context of mistrust, and this does nothing to help things," said Pierre-Loup Etienne, analyst at AlphaValue.
Etienne said the risk of a future block sale was limited because Gecina's heavy exposure to the slowing Paris office market would ward off many investors.
"And the banks aren't interested in surrendering their bonds at a discount since they would register losses," Etienne said.
The relationship between Gecina and its Spanish shareholders has been murky from the start. As chairman of Gecina in 2009, Rivero tried to navigate its purchase of a 49 percent stake in another Rivero property firm, Bami, for 108 million euros.
The deal fell through when Gecina's other shareholders rejected it. Rivero is facing corruption charges in France.
The charges against Rivero for dealing while chief of Gecina mean he cannot receive dividends from the French firm, a source said, potentially hurting his ability to meet debt payments.
Spain's banks have suffered dearly for over-lending during a decade-long property boom, and a stress test last week showed the sector would need 59.3 billion euros in extra capital to ride out a serious economic downturn.
The results of the audit by Oliver Wyman are a prelude to Spain receiving as much as 100 million euros in European rescue funds for its banks and could pave the way for a wider international rescue package for the state.
Other banks in the loan syndicate are also labouring to recover from mis-steps before and during the credit crisis.
RBS was taken over by the British government when the financial crisis exacerbated the fallout from its disastrous acquisition of Dutch bank ABN Amro. Former boss Fred Goodwin was stripped of his knighthood earlier this year.
On Monday, current Chief Executive Stephen Hester described RBS as a "British poster child for what went wrong in banking" and said the bank was engaged in "the most far-reaching corporate restructuring ever". Hester has overseen a 700 billion pound reduction in the bank's balance sheet to cut risk.