12 February 2015 – El Confidencial
Fortress, the alternative investment fund that bought the savings banks’ financing business, has announced to its employees that is it going to undertake a statutory redundancy procedure (un expediente de regulación de empleo or ERE) at Geslico, the subsidiary dedicated to loan recovery. Although the US entity has not quantified how many people will be affected by the drastic measure, sources close to the firm say that almost 40% of the workforce could be made redundant.
Geslico, the group formed by three subsidiaries with headquarters in Madrid, Valencia and Zaragoza, currently employs 450 people, of which around 200 could be made redundant as a result of the ERE. Although Fortress has not yet explained the real reasons for adopting this measure, sources close to the company explain the that job cuts are due to the loss of business resulting from the mergers of savings banks.
The announcement was made at Paratus, the business centre created by Fortress in Barcelona to manage all of the acquisitions the fund has made in Spain since it started to buy non-performing loans from financial institutions such as Banco Santander and debt from the real estate company Realia. Subsequently, between 2012 and 2013, Fortress acquired Lico Leasing, the holding company that provides financing to companies in the Spanish Confederation of Savings Banks (Confederación Española de Cajas de Ahorros or CECA), and Geslico, which it bought for almost €220 million.
Nevertheless, the name Fortress gained notoriety in Spain when the fund tried to sell 300 homes it had bought from Sareb, at a much higher price than the State’s bad bank had agreed to transfer them to a group of individuals.
These types of funds, known as opportunistic or vulture funds, have become the new owners of mountains of unpaid debt – estimated to amount to €50,000 million – which originated from the balance sheets of Spanish banks and was transferred for a price significantly below its face value. Subsequently, these funds manage the debts by trying to negotiate long-term payment plans with the borrowers to recover the initial amounts loaned.
The ERE at Geslico is not the first to be proposed by Fortress, which already significantly reduced Geslico’s workforce, at the end of 2013. At that time, Paratus informed its employees that 174 of the 470 strong workforce were going to be made redundant, with their contracts terminated. Another 40 were told that their employment contracts would be suspended temporarily (una suspensión temporal de empleo or ERTE), which was to result in 210 employees losing their jobs on a permanent or temporary basis. In the end, following internal negotiations, the list of redundancies was reduced to 120 people.
Prior to this, in 2012, the shareholders of Lico Corporation, which included BBVA, Banco Sabadell, Mapfre, Ibercaja, Unicaja, CECA, Novagalicia, CatalunyaCaixa and Bankia, amongst others, had already announced a redundancy procedure, which affected 95 of the 230 employees at the financing company.
In the most recent annual report filed by Fortress, the fund claimed that it had “confidence in the robust future of Geslico’s activity, due to its broad range of clients and the trend towards outsourcing debt recovery work”. Nevertheless, it warned in its forecast for 2014 that “annual recoveries may decline slightly with respect to 2013, as a result of the restructuring of the banking sector and the reduction in lending in recent years”. The reality has proven to be worse than expected and Geslico’s employees are paying the price.
Original story: El Confidencial (by Agustín Marco)
Translation: Carmel Drake
Source:: AURA Real Estate Experts