“They aren’t officially bankrupt because they have been refinanced time and time again,” Fernando Rodriguez de Acuna Martinez, a partner at the company, said by telephone. “Their assets are worth much less than their liabilities, they struggle to repay loans and they haven’t revaluated them to reflect today’s prices.”
In Ireland three years ago, developer Liam Carroll’s Ronnie Rentals Ltd. was forced to value its assets to market prices. Accumulated losses at the company more than trebled to 541 million euros in the six months through March 2009 after it provisioned for all known liabilities and anticipated losses, according to accounts filed last year with Ireland’s Companies Registration Office.
The Bank of Spain allows loans that are refinanced before turning delinquent and interest-only loans to be considered “normal” or “performing” on banks’ books, according to Manso.
“You won’t find that data anywhere,” Manso said. “There has been a lot of cheating going on where banks have lent developers new money, classed as new lending, so they can pay off their original loans.” That’s masking delinquency, he said.