Ivanhoe Cambridge closer to converting debt to shares of French REIT

Canadian Real Estate giant Ivanhoe Cambridge and partner Blackstone Real Estate are a step closer to gaining greater control of French REIT/SIIC Gecina.
Ivanhoe and Blackstone are partners in an investment that gives them ownership of 64.7%, or about €1bn debt held by two major shareholders.
The possibility of converting that debt into shares got stronger at the end of last week when dividend payments to Joaquin Rivero, a major shareholder and former executive of the French REIT/SIIC Gecina were suspended by a judge for the second straight year.
News of the development broke Sunday in international real estate authority Property Investor Europe.
A spokesman for Ivanhoé Cambridge in Montreal said Monday that the company could not comment on the latest developments.
However, Ivanhoé Cambridge European property head Meka Brunel was quoted recently in Property Investor Europe saying the acquisition of that debt was an opportunity play because two primary shareholders are in distress.
Don't just want debt for a return
“In this specific case, whatever we are paid back if Mr. Rivero and Mr. (Bautista) Soler sell their position and reimburse us or give access to the shares, we’ll be happy,” she said. “We don’t want to buy just debt for getting a 7% or 5% or 6% return, we want to buy debt where we know about the underlying assets. In the case of Gecina of course we know because it's a listed company.”
PIE quoted local Spanish newspapers as reporting that a judge decided to allow an application by Gecina to freeze €45m to Rivero in dividend payments for 2012, until the conclusion of a judicial investigation into allegations of misuse of corporate assets during his times as CEO and chairman.
Les Echos noted that a freeze on a similar payment for 2011 caused the default, allowing Spanish creditors to sell a portion of the debt just last month to Blackstone and Ivanhoé Cambridge.
Les Echos also reported, according to PIE, that Blackstone and Ivanhoé Cambridge are increasing pressure on the two men with the aim of converting their debt positions into Gecina stock. However this has so far been refused by the French judiciary while the investigation continues.
Ivanhoe and Blackstone formed partnership
The two investors announced just one month ago that they have built a 64.7% interest in the €1.6bn of loans owed by former Gecina CEO Joaquin Rivero and the family of his ally Bautista Soler, who used their Gecina shares as collateral for the debt.
Rivero's Alteco Gestion and Soler's MAG Import filed for bankruptcy in early October after banks refused to reschedule payments, and a number of the creditor banks have since offloaded the debt rather than waiting for the completion of the foreclosure process.
With Rivero and Soler's Gecina stakes frozen during a French fraud investigation against the two, dividend payments, used to cover loan servicing, are also halted.
Blackstone and Ivanhoé Cambridge, the real estate subsidiary of Montreal-based fund manager Caisse de Dépôt et Placement du Québec, have been the main beneficiaries, buying up around €1bn of the debt in a move that could eventually give them control of Rivero and Soler's combined 31% stake in Gecina, PIE reported last month.
Blackstone and Ivanhoé Cambridge have now set out the details of their partnership in a filing with French financial markets regulator AMF. They committed to only buy Gecina shares, or further debt guaranteed by Gecina shares, through the partnership, which they said will last as long as the joint investment continues.
Ivanhoé Cambridge will have a right of first refusal if the Holdco partnership vehicle sells any debt or Gecina stock.
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