2023-06-25 09:10:27
Barcelona”I think the family has something to lose”. The company is Celsa and the author of this prediction is a senior official of the Generalitat. It is a possibility of how the great serial about this giant of the Catalan industry can end. Now it is about to be resolved, when more than three years have passed since a series of funds entered the ring to seize a belt that the Rubiralta family is reluctant to lose: that of control of the first steel company in ‘Spain.
Before that, however, the story of a split: the company based in Castellbisbal was born from the separation of the businesses of the brothers Francisco and José María Rubiralta Vilaseca, who shared 50% of the shares of Barna Steel Werfen. The break was consummated in 2006, after the former decided to buy the Finnish group Fundia, against the criterion of the latter. Francisco stayed with Celsa while José María left to take over Werfen, a healthcare company specializing in coagulation, critical care and autoimmunity. This company is chaired by a son of the latter, Marc Rubiralta.
What began as an unequal division – one brother kept the steel empire and the other an incipient medical device company – is two decades later the story of an off-peak transatlantic liner and a hospital multinational in the up A source close to that complicated process of family separation explains to this newspaper that the separation was hard. “People thought that Werfen’s was the loser, the separation was not very friendly and the two brothers did not speak to each other. In fact, now Werfen’s could have helped and come to Celsa’s rescue,” he adds , raising a scenario that has not occurred.
A multinational empire
The new central court of Roland Garros, in Paris; the new reactor at the Hinkley Point C nuclear facility in Somerset and up to half of the wind farms built in Spain in 2021 and 2022. All these infrastructures share a framework of thousands of tonnes of steel manufactured by it is also the first European producer of low-emission circular steel. Of family origin, Celsa is made up of six companies and has 120 work centers in 9 European countries, 7 steel mills, 12 rolling mills and 45 recycling plants. Last year this industrial giant produced 5.5 million tons of steel, which allowed it to close the financial year with record turnover figures, about 6,084 million euros, after also the historical figure of 5,283 million of 2021.
Despite these soaring revenues, Celsa cannot deal with its high debt, the underlying reason for the last five years of turbulence in the company. The steel business is very investment-intensive, a fact that forced the company to maintain a high liability and which led it to refinance it in two installments in 2017: a participatory credit -now of 1.4 billion euros- and a jumbo – now worth 800 million euros. “This is where the company’s mistake comes from: it fell asleep. When they closed this operation they already knew that the banks were selling the debt to investment funds at very low prices,” says a source familiar with the process, who also highlights highly leveraged investments and purchases outside of Spain to grow on a European scale, such as Poland: “It never gave a good result with respect to the debt assumed to make the investments.”
This was the case until the creditors – CaixaBank, Banco Sabadell, Santander and BBVA –, in a European context of selling refinanced credits, decided to get rid of a large part of the liability. And that’s when a series of specialist funds came in, taking over most of the debt. These funds were initially Attestor and Deutche Bank in the case of participatory credit, and Goldman Sachs, Sculptor, CVC, SVP, Golden Tree, Cross Ocean and JP Morgan in the case of jumbo.
The State, to the rescue of the Rubiraltas
The pandemic and the impossibility of assuming the payment of the various maturities forced the steel company to stop production, and not only that: it also took this financial obligation to the courts with the aim of renegotiating it. The situation got complicated, until the family was called eureka.
It will be a year now, on June 27, 2022, the State approved the rescue of the company with an aid of 550 million euros at the expense of the fund to support the solvency of strategic companies, managed by the State Society of Industrial Participations (SEPI). It was the largest rescue since the special fund was created to help strategic companies harmed by covid, and was divided into a participatory loan of 280.5 million and another ordinary loan of 269.5 million.
A year later the aid has still not materialized because the company and creditors did not agree. The condition of the State was that Celsa would restructure its debt and that the funds would renounce collecting a significant part of it. In response, the funds began a crusade: to convert a portion of the debt into company stock, as stipulated in the contract in the event of default. SEPI sources consulted by this newspaper explain that the aid has been approved, with the approval of Brussels and without a deadline for execution. In other words, if there is an agreement, there is aid.
The funds wanted to keep 49% of the shares in exchange for giving up 500 M€ of debt, but the family refused and now they aspire to control the company
There began a time trial of offers and counter-offers between the two parties to try to unblock the aid: the funds put on the table the possibility of giving up 500 million of debt in exchange for 49% of the shares. The family, which still owns 100%, would keep 51%. But the company had asked the funds to waive 1,200 of the then 2,200 million of the debt. The Minister for Enterprise and Work, Roger Torrent, came out to show his support for the steel company.
It was the prelude to a tug-of-war that would end up in the courts a few months later: the creditor funds started a pre-bankruptcy process with the presentation of a restructuring plan to the commercial court number 2 in Barcelona. The final proposal arrived in April and consisted of transforming the convertible debt into shares with the aim of reducing the company’s liabilities to 1,291 million euros through the capitalization of the convertible debt and part of the jumbo debt.
But be careful: they took advantage of the entry into force of the new bankruptcy law with a proposal that would allow them to keep 100% of the shares and generate new debt. This new rule, which arrived a few days before the funds legalized the process, meant the transposition of a European directive from 2013, which sought to encourage pre-bankruptcy solutions to avoid insolvencies of companies that are viable.
“Previously, the rule allowed only the financial debt to be restructured, and now, faced with a current or imminent insolvency situation, the company can restructure all liabilities, with the addition that the Spanish legislator decided that creditors can present plans of restructuring. In these cases, these restructuring measures can be imposed on the company, even to take control of the company”, explains the partner of the restructuring and insolvency department of Augusta Abogados, Alícia to the ARA farrier
Since then, they have been transcending the movements that will serve the judge to issue a verdict, but not before July, when two oral hearings are scheduled. At the same time, Celsa has presented allegations, as well as two appeals of unconstitutionality, also pending resolution.
Funds, 100% assault
The great debate has revolved around a single concept: Celsa’s capital. Why is company value important? The funds want the judge to approve the restructuring plan they have submitted to extend its effects to creditors who do not support the plan, and especially to partners. If this were the case, the funds could enter the capital, and this plan would allow them to convert their credit into capital, that is, to enter it as shareholders. Creditors argued that Celsa’s valuation does not even cover the company’s debt. “Celsa’s shares have no value and, therefore, any value granted to the shareholder would mean a direct and incremental loss to the company’s creditors,” they added. That’s why they claimed 100%.
Thus, in recent months reports have been made public by the parties or commissioned by the judicial authority: on the one hand, a report by Lazard and AZ Capital, based on updated projections of the business plan, placed the capitalization of the steel industry over 6,000 million euros. On the other hand, months later the independent restructuring expert Lexaudit commissioned a report from Grant Thornton that lowered this valuation to 2.8 billion. Another report, signed by BDO, has recently become known, which sees “significant errors” in that document, as published The Economist.
In the midst of this very tough pulse, Francesc Rubiralta son, president of Celsa since 2010, has thrown himself into the task of lobbying. You see, those who know him well explain how the manager has become accustomed to pressuring the administrations, both Catalan and Spanish, and even the workers, in defense of the interests of his family at the head of the company. The calls and face-to-face meetings have been a constant and the manager, whose capacity and iron will stand out, has managed to get the administration in both Catalonia and Madrid to align with his theses. “He does a lot and he does it very well,” these voices explain, about his ability and stubbornness to knock on all the doors. Another source also corroborates this facet: “Francesc Rubiralta is very involved, he has spoken to everyone and for years he has had a direct line with the ministry and the Generalitat”.
Francesc Rubiralta has personally taken it upon himself to put the central government, the Generalitat and even the employees on his side
“I would bet that by the end of June we should know something about it,” a banking sector source familiar with the situation told this newspaper a few weeks ago. The omen about the future of the steel mill is also clear: “We believe that the Rubiraltas will end up losing and they will see how the funds enter the company.” The truth is that this is a scenario that is gaining strength every time: of the 2.3 billion debt in the hands of creditor funds, 1.400 million are convertible, which means that they can be converted into shares.
The banking source consulted by this newspaper explains that the company may be fine to delay the process, “to exhaust the funds, to change the context or to receive some aid”. In a similar vein, another source also sees a strategy of attrition and collection of media: “They have tried to link it to the law antiopes or as if an expropriation is taking place”, he adds, and adds to the bad omens for the family: “My feeling is like in the submarine of the Titanic: they are running out of oxygen. They have little to do with the inflow of funds into capital. Looking at the judge’s rulings, it’s leaning in favor of the creditors. It makes all the sense in the world, because the company will be viable.”
In the meantime, the workers see with resignation the legal process in which the company is immersed, to which they have already requested a meeting to find out the latest developments. Sources from the works committee consulted by this newspaper explain that they support Celsa’s current industrial model, based on SEPI’s help: “It ensures both the continuity of industrial activity and existing employment”. Celsa has 11,929 workers, 2,409 of whom are in Catalonia.
The weight of the debt has consequences, and the current regulations “open the door to a new way of acquiring companies in financial difficulty through the acquisition of its liabilities,” states Herrador about the extreme situation that the first Catalan family company is experiencing by turnover. This process will keep the steel giant alive, but it may leave it without two of its great attributes: familiar i Catalan.
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