Polaris World has asked the Court of Murcia to benefit during three months granted by the new Bankruptcy Act, to renegotiate their debts in agreement with their creditors, as have confirmed sources of Polaris World.
The company requested on 22 December authorization in order to invoke this recent modification of the Bankruptcy Act, already asked other companies such as Nozar or Proinsa. The request has gone to the Court of commerce number 2 of Murcia, as indicated in judicial sources.
The possibility that a State of insolvency company has a margin to negotiate a Convention payment to creditors, while none of these urge its bankrupcy, is reflected in article 5.3 of the Bankruptcy Act.
This article, following the reform of March 27, 2009, establishes that "the duty to request the Declaration of bankrupcy won't be enforceable to the debtor, if the insolvency has started negotiations for accession to an early proposal of agreement and within the time limit laid down in this law, brought it to the attention of the bankrupy court for his declaration of insolvency". "After three months of the communication to the courthouse, the debtor, whether or not reached accessions necessary for admission to the early proposal of agreement, shall request the Declaration of Insolvency within the next month", says the legal text..
The same sources of Polaris World indicated that this is not a bankrupcy, but a measure to which companies can turn when they are in their debt negotiation process request so that during those three months no creditor can urge the bankrupcy.
This could be bad news for the resorts, those of you who may be smiling and rubbing your hands with glee may not be doing so in a few months time. If Polaris go bankrupt, which is how it seems it will go, the facilities at the resorts will very likely close and any other facilities planned or in the works will stop. Bad times sorry to say.
Polaris world has finally admitted to having massive financial problems, owning up to what it calls "a lack of liquidity."
On the 22nd December, the day on which the focus of the nation was occupied with the El Gordo lottery, Polaris World petitioned for a period of negotiation for several of its companies, with their creditors to which they are entitled to under Article 5.3 of the insolvency act, the same route that other development giants with liquidity issues such as Nozar and Proinsa followed.
The petition went to Commercial Court Number 2 in Murcia, and news of the action was only released this afternoon.
The insolvency process being followed is basically a process whereby a business lodges its intention to negotiate with its creditors, buying itself a period of time with which to negotiate an amicable agreement with debtors, rather than being forced into bankruptcy proceedings by one of them.
Polaris now has three months in which to negotiate settlement of its debts. If it does not reach agreement with all its creditors by that date, it will be forced to enter into a voluntary bankruptcy action, a concurso voluntario de acreedores.
Were this to happen, a court judge would then appoint a bankruptcy trustee, charged with summarizing all the debts of the company, within 15 days. Until that time, the company will continue to have control of its assets and continue to trade normally.
Polaris World has debts which are rumoured to be around 900 million euros, its principle creditors being Bancaja, CAMBank, Banco Popular, Banco de Valencia and Cajamurcia.
In June the company was in negotiations with these entities to reduce its indebtedness to zero, by handing over ownership of its 6 residential Murcian complexes to the banks, whilst continuing to manage the hotel and management services itself.
Although the company, which began in 2001 with the Torre Pacheco residential complex, had reported massive sales and succeeded in delivering a quality product which fulfilled the needs of those wishing for a quality residential and holiday development, in a secure and attractive environment, sales had not reached projected targets although massive investment in infrastructure and development continued.
In 2006 the company had predicted 800 million euros worth of sales, but closed the year with a total of 468 million. Although 2007 figures still reached 530 million, these figures still fell short of financial projections, and in 2007, one of the two co-founders of the group, and owner of 50% of the shares, Facundo Armero, sold out to credit Suisse DLJ Partners, Banco de Valencia and EMTWO investments.
The other partner, Pedro Garcia Merono, retained his 50%, which was valued at around 600 million euros.
The company has continued to build and invest in new developments, investing 350 million euros in continued construction in 2009, although as the property market started to implode, progress on the last development at Condado de Alhama slowed noticeably and residents are now faced with the very real possibility that the resort will not be completed to the spec that was promised at the time of purchase.
The company is said to have lost 300 million euros in revenue alone from the non-completion of this project, which some have said should never have even commenced, the 2 year delay in construction coinciding with the bubble of the construction industry bursting almost as soon as work had begun.
If it did happen and Polaris went bankrupt, would the assets of Polaris (golf courses, restaurants, bars, cafes, supermarket, hotels? what exactly do they own nowadays) then be sold off to raise money. Would this mean an opportunity for others to run the bars, shops etc. I understand La Manga will shortly be sold to a consortium, maybe they would interested in the Polaris Golf Courses?
What's the best/worst case scenario for owners at Polaris resorts.
This could be bad news for the resorts, those of you who may be smiling and rubbing your hands with glee may not be doing so in a few months time. If Polaris go bankrupt, which is how it seems it will go, the facilities at the resorts will very likely close and any other facilities planned or in the works will stop. Bad times sorry to say.
I'm sure no one wanted Polaris to go bankrupt, the simple fact is that it couldn't go on as it was, i.e. with cronic supply overcapacity.
Of course there will be significant implications, the fact is this had to happen.
Yes, you are correct. I am just going through the same situation at Coventry Airport where the company that owned the lease was 'wound up' by an action in the High Court.I have 2 aircraft based there (but perfectly safe as they are my assets - I just 'use the services of the airfield for which I pay for). There will be a buyer of the lease / assets and then everybody gets back to normal again. Golf Courses and Restaurants are asseets. What happens is one of three things in the UK but I don't know Spanish law but it can't be too different.
1) An Administatative Receiver is appointed who then 'administers the company and finds a way out of the mess;...
This means that an administrative receiver is a manager of the company's property and is appointed by the holders of a particular type of loan ('debenture') secured by a charge on the company's assets. The difference between this and receivership is that an administrative receiver looks after substantially the whole of the company's property and has certain statutory powers including the power to carry on or even transfer the business of the company, to enter into contracts and to borrow money. You can deal with an administrative receiver as if he was a director of the company but once the company goes into liquidation he will act as a receiver. He does not owe you a duty of care; his duty is to his appointer (Polaris or the people making the loans). He will be trying to raise money to pay off the appointer's charge. You can theoretically still sue the company for any monies due to you while an administrative receiver is acting - however there is little point in doing so because he probably has a prior claim to yours on all the assets. You can also apply for a winding up order.
2) An Administrator is appointed. The administration procedure allows a company or its directors and creditors to apply to the Court for an order that the affairs of the company be managed by an administrator (who must be a licensed insolvency practitioner) while the order is in force. The procedure is intended to provide a company in financial difficulties with the opportunity of either surviving or, at least, enabling assets to be realised in a more advantageous manner than if the company was wound up. If an administrator is appointed any administrative receiver or receiver must vacate office. The administrator must take under his control all of the company's property and is given wide statutory powers to manage the affairs, business and property of the company. Within three months of the order he must send all creditors a statement of his proposals for achieving the purposes specified in the order and call a meeting of the creditors at which they can vote on the proposals. If a majority in value of creditors vote in favour of the administration order then the administrator can proceed to implement his plan. While an administration order is in force any creditor may apply to the Court if his affairs are being managed in an unfairly prejudicial manner. Administrators have no power to make any distribution of the company's assets to creditors although they may pay the ordinary debts of the company (such as royalties) as they fall due. They are, however, unlikely to do so.
3) Liquidation - With this option the shareholders may voluntarily wind up a company if it has sufficient money to pay off all its debts and they sometimes do so to reorganise the company. Publishing contracts often provide that the contract will not come to an end if there is a voluntary winding up solely to reconstruct the company.
However, insolvent or compulsory winding up is more common. Once a winding up order has been made the legal assets are frozen. No legal proceedings may be commenced or continued against the property or the company without the Court's leave. Any orders or agreements for payment of money out of the company are void. Either the Official Receiver or a licensed insolvency practitioner will become liquidator of the company. The liquidator's job is to collect in all the assets of the company and arrange to pay them out to creditors in the prescribed order. Money will first be paid to secured creditors, that is those who have a charge over its assets (usually banks and major lenders or suppliers). The next to be paid are preferential debts which include PAYE, Social Security contributions and unpaid wages to employees for the four month period prior to the liquidation. Unsecured creditors (such as those due royalties) come at the bottom of the list and often there is no money available for them.
I am not too worried as any administration will want the assets to 'make money' so the courses will I am sure be open but I suspect that other 'facilities' may not be if they are losing money.I also expect employee numbers would be cut which is quite a normal thing as they make up the biggest expenditure !! It will take time to come out the other side but it WILL come out the other side.
Mike why did you keep selling Polaris properties when it was obvious to all that the company would end up bust? I ask this question as you now feel that the company's bankruptcy will be bad for all resorts.
I agree with your views short term, however long term this action will prove beneficial, especially for La Torre - services will undoubtedly improve as competition steps up. I also believe that the others resorts will flourish whn the 'crunch' is over.
quote:Originally posted by pricemi
This could be bad news for the resorts, those of you who may be smiling and rubbing your hands with glee may not be doing so in a few months time. If Polaris go bankrupt, which is how it seems it will go, the facilities at the resorts will very likely close and any other facilities planned or in the works will stop. Bad times sorry to say.
"Mike why did you keep selling Polaris properties when it was obvious to all that the company would end up bust? I ask this question as you now feel that the company's bankruptcy will be bad for all resorts."
Why am I to blame for this, I think your comment is totally unfair and unjustified. Please address your comments to all the other agents who sold Polaris properties and do not single me out.
You're not to blame for the company's collapse Mike, of course your not. However if I were in your shoes or indeed the shoes of any other agent I wouldn't have sold property in these circumstances ie in the knowledge that the company is likely to go under with the opinion that this would be 'bad news' for the resorts and those that hve purchased.
quote:Originally posted by pricemi
JMR
"Mike why did you keep selling Polaris properties when it was obvious to all that the company would end up bust? I ask this question as you now feel that the company's bankruptcy will be bad for all resorts."
Why am I to blame for this, I think your comment is totally unfair and unjustified. Please address your comments to all the other agents who sold Polaris properties and do not single me out.
JMR - I have not sold a Polaris off-plan property for over 4 years, for your information. You cannot hold an agent accountable for selling a property at Polaris with the company now lookng like going down. The same as you cannot hold a shop keeper accountable for selling you a packet of cigarettes when we all know the circumstances that will lead too. The agent and the shopkeeper are in business to sell the products a purchaser approaches them to buy.
I learnt from experience years ago if you told a buyer not to buy at Polaris or another developer for whatever reason, that there will be 100 other agents out there willing to sell to them, that is how business works.
I have heard stories for the last 6 years that Polaris were about to go bust, almost since the day they opened shop. Should I have stopped selling them 6 years ago???? What do you think the legal implications from Polaris would have been to me or any other agent who told people "oh don't buy from them they will be bust in a few weeks time." Do you think that anyone intent on buying on Polaris would have listened to me, no they would have gone to another agent who would have told them not too worry and that Polaris were fine.
It sounds terrible and would be if they were running the resorts right. Unfortunately they are not.
Selling off the assets (restaurants and bars) could be beneficial if acquired by the right business people who know how to run them. It may also give the community an opportinity to acquire some of the assets that Polaris were fleecing us on (namely telecommunications).
Greed overcame them and starting Condado when other resorts were completely unfinished was a disgrace especially in the ecomomic situation we found ourselves in a few years back. The top boys will leave as millionaires and simply start again. I won't shed a tear but live in hope that there will be good people looking for a good opportunity and that it will all work out right in the end.
Mike whether your last sale was offplan or resale is immaterial and to be fair I've a fair idea how business operates.
Another analergy to run alonside your own, if I buy a kettle that has a dodgy connection and it subsequently blows up then I would hold the shopkeeper accountable - assuming of course that he knew that the connection was faulty and he deliberately didn't tell me about it!!
Ask the last buyer of a Polaris property from you for his views on the company's bankruptcy and your own personal opinion that this is a big 'negative' for the resort.
Mike lets now draw a line under this - you have your views to which you are entitled like I have mine. I have no doubt that you are an honourable man I just simple wanted you to answer the question that I posed which you have done. Thanks for that.
quote:Originally posted by pricemi
JMR - I have not sold a Polaris off-plan property for over 4 years, for your information. You cannot hold an agent accountable for selling a property at Polaris with the company now lookng like going down. The same as you cannot hold a shop keeper accountable for selling you a packet of cigarettes when we all know the circumstances that will lead too. The agent and the shopkeeper are in business to sell the products a purchaser approaches them to buy.
I learnt from experience years ago if you told a buyer not to buy at Polaris or another developer for whatever reason, that there will be 100 other agents out there willing to sell to them, that is how business works.
I have heard stories for the last 6 years that Polaris were about to go bust, almost since the day they opened shop. Should I have stopped selling them 6 years ago???? What do you think the legal implications from Polaris would have been to me or any other agent who told people "oh don't buy from them they will be bust in a few weeks time." Do you think that anyone intent on buying on Polaris would have listened to me, no they would have gone to another agent who would have told them not too worry and that Polaris were fine.
I don't know what point you were trying to make, irrespective it is irrelevant to the matter at hand. Let's draw a line under it as you say.
Where does this leave the resorts now?
Will the town centre at Hacienda be completed?
What will happen to the un-completed properties, if clients have not completed to date then what will happen? I know from past experience with another developer who went the same way that once Bankruptcy/Recievership is in place the properties outstanding can go into a "probate" situation which can take up to 2 years to resolve, I know of instances where people have completed on unfinished properties (no kitchen, bathroom fitted etc) just to get hold of the property before it went into this 2 yr limbo situation. Anyone not completed yet or due to complete needs to contact their lawyer ASAP and find out where they stand, better to complete on a 90% completed property than to lose everything, after all if it is 90% complete now it will never get any better.
Polaris World file for Bankruptcy Protection
Posted - 28/12/2009 : 18:29:03
