Arcus-owned Brisa considering legal action against hedge fund

28 January 2019 - 12:00 am UTC

Portuguese motorway investor Brisa is considering taking legal action against hedge fund Strategic Value Partners (SVP), which last week decided to take over ownership of Auto Estradas do Douro Litoral (AEDL).

A consortium of lenders led by SVP on 24 January announced its decision to take over AEDL, saying that the Portuguese concessionaire had been in default of its debt obligations under Brisa.

But its unilateral decision is set to be challenged by Brisa, which is part-owned by infrastructure investor Arcus, as it was taken in the middle of talks about a refinancing process launched last October.

Since then, Brisa had been holding talks with banks interested in acquiring SVP’s debt position as part of this refinancing process, it is understood.

Brisa said in a Sunday (27 January) statement it will use all means at its disposal, including taking SVP to court, as it considers the hedge fund’s decision a hostile action taken without notice and in the middle of a negotiating process.

“Brisa sought, in good faith and through a process of constructive dialogue, to reach an agreement to restructure the debt of AEDL,” the Portuguese group said, adding that SVP has taken control with the sole purpose to sell in the short term, an action deemed “detrimental to the interests of the sector”.

Brisa has added that the hedge fund’s decision was not shared by other AEDL lenders, including Banco Santander, Millennium BCP, Caixa Geral de Depositos and RBS, which still retain their position as lenders.

SVP has already appointed new directors and a new chairman, Andy Pearson, who most recently was the CEO of the M6 toll road in the UK.

Last November it emerged that Brisa was in the process of refinancing hedge fund-owned debt linked to two concessions, Douro Litoral and also Brisal. Inframation understands that Brisa still retains its ownership of Brisal.

SVP and other funds acquired the debt of these two concessionaires at significant discounts during the years of the financial crisis, when both assets suffered losses due to declining traffic.

In its 2017 annual report, Brisa revealed it had to recognise impairment losses linked to these two assets during previous years, eventually leading to the restructuring and the distressed funds acquiring the debt.

Auto-estradas Douro Litoral (AEDL) operates a 79km motorway stretch serving the Porto metropolitan area in the north. Brisa was granted the concession for a 27-year period under a EUR 1bn investment back in 2008, when it raised EUR 833m of debt for the project.

Brisal operates the 93km A17 motorway between Marinha Grande and Mira in the centre of the country.

The Brisa Group is held by Portuguese investor Josè de Mello Investimentos (52.73%) and Arcus European Infrastructure Group (37.37%), with treasury shares and minor investors holding the rest.

 

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