Friday 15 November 2019

Joint venture spares FBD pain in Spain

WITH Spain's economic crisis continuing to worsen, insurer FBD must be hoping that last year's deal to transfer ownership of assets there to a joint venture with Farm Business Developments (its controlling shareholder) will ease investor fears.

For years, outside investors had complained that as well as its Irish insurance operation, FBD also owned two large hotel and golf resorts in Spain. Then, in August, 2011, FBD announced it was spinning off these Spanish assets into a joint venture with Farmer Business Developments, which has a 29.7 per cent stake in FBD.

The Spanish assets had been funded by a €62.6m loan from FBD and a €60m loan from Farmer Business Development, which had been guaranteed by FBD (ie FBD's total exposure was €122.6m plus); however, much of the Spanish assets' banking facilities of €57.4m had been drawn down.

Under the new deal, FBD's exposure has been capped at €70.1m. The downside is that most of this exposure, €62.6m, is in the form of loan notes which rank behind the €52.5m of loan notes used by Farmer Business Developments to finance its share of the joint venture.

While this arrangement is convoluted, with the share price up almost 50 per cent over the past year, it seems to have spared FBD from the pain in Spain.

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