A composition agreement was approved involving the merger of some of group’s companies and with different alternatives, one of which is specifically designed for financial institutions, but open to all creditors, proposing a partial capitalization of the insolvency credits and the payment of the resulting credits through the realization of certain assets and the free cash flow generated by the company in the coming eight years.

The judgment of  Barcelona Commercial Court No. 9  of July 8, 2014, approved  the composition agreement proposal RENTA CORPORACIÓN REAL ESTATE S.A. (“RENTA CORPORACIÓN”) and the companies of its group submitted, which the creditors’ meetings of each of the companies had previously accepted.

The composition agreement proposal approved establishes a structural amendment of the group, specifically, the merger through absorption of RENTA CORPORACIÓN REAL ESTATE FINANCE S.A.U. and RENTA CORPORACIÓN CORE BUSINESS S.L.U. by RENTA CORPORACIÓN REAL ESTATE ES S.A.U., all of which are affiliates held 100% by RENTA CORPORACIÓN.

To meet all the creditors’ requirements, the composition agreement establishes different alternatives. While the residual alternative is a payment proposal with debt relief (of up to 85%) and grace periods (of up to eight years for ordinary credits), it also establishes an alternative which, although initially negotiated and agreed with the financial institutions (holders of the majority of the insolvency liabilities), all the creditors bound by the agreement were allowed to choose. This alternative establishes that 70% of the amount of the credits will be paid through a capital increase in RENTA CORPORACIÓN at a swap rate of one share of €1 face value for every €5.90 of credit. Moreover, each creditor’s stake in the share capital resulting from the increase was limited to a maximum of 5%. As RENTA CORPORACIÓN is a listed company, admission to trading will be requested for the shares created within this capital increase. The remaining 30% of the amount of the credits would be paid through the realization of certain assets of the insolvent companies and through the available free cash flow the group generates in the coming eight years.

This agreement proposal will enable RENTA CORPORACIÓN and its group companies to maintain and develop their business activity, having satisfactorily overcome the insolvency procedure through the approval of the composition agreement. The alternatives in the composition agreement proposal allow the insolvency credits to be met largely through a capital increase and, therefore, without detracting from the resources of the business activity; the rest will be met through the excess resources generated by this activity, thus ensuring the group’s future viability.

In addition, the merger established in the agreement allows the group to be restructured to adapt it to current market circumstances, using a mechanism accepted previously by the creditors that simplifies the procedure and reduces the processes for carrying out the structural amendment.