To the chagrin of a creditor group that includes Avenue Capital Group, BlueMountain Capital Management and Neuberger Berman, the rescue of a troubled very high speed passenger railroad whose loans they bet on has failed to materialize.
The group bet on a funding to save a premier advertised Spain to France high speed rail line. TP Ferro was a 2003 joint venture between Spain’s Actividades de Construccion & Servicios SA and Eiffage SA of France. They won a prestige 50-year concession for a 44-kilometer rail line to link Figueres, in Spain, and Perpignan, on the French Mediterranean coast. The goal was to fund that small link to connect Barcelona and Madrid to the rest of Europe’s high-speed train network. What could go wrong?
Quite a bit actually.
Delays and geo-polotical issues with the rail project has left them holding losses in TP Ferro Concesionaria SA. And according to Bloomberg reporters the investors have little recourse promise from the the Governments in Spain and France. Neither government wants to lend a hand to international investors, banks and construction companies.
Avenue, BlueMountain and Neuberger Berman bought some of TP Ferro’s 445 million euros ($492 million) of loans at about 70 cents on the euro last year. Now that is valued at about 50 cents, according to two people familiar with the matter. The rail company filed for insolvency proceedings on July 17 after the governments turned down its bailout requests and an international tribunal rejected its bid for compensation.
If TP Ferro’s debtholders, which also include lenders Banco Bilbao Vizcaya Argentaria SA, ING Groep NV and Bankia SA, fail to reach an agreement with the owners and governments to restructure the debt in court, the working theory is that the company will be liquidated and its concession to operate the railway will end. That would leave TP Ferro with no assets.
Bloomberg notes that about 92 percent of companies that enter insolvency proceedings in Spain are liquidated, according to rating company Axesor’s most recent data.
For a more detailed report log onto Bloomberg and read the entire report “Hedge Funds Near End of the Line for Bailouts on Railway Bet”, by Luca Casiraghi and Katie Linsell.