What A Tangled Web: Orizonia and Marsans

Next month, a judge in Palma will make a decision as to the nature of the bankruptcy that brought down the Orizonia travel group in February last year. It may be that the judge considers administrators and certain shareholders in the company responsible for its collapse and orders the forfeiture of their assets. Two major creditors plus a group of more than one hundred former employees have been pressing for such an outcome.

Orizonia is just one part of a jigsaw in what has been a story, which is still very much ongoing, of corporate wrong-doing and concealment that ranks alongside cases such as the collapse of Rumasa in the 1980s (and Nueva Rumasa very much more recently) in terms of the scale of fraud, either alleged or proven. Orizonia, which had only been formed through a buy-out from Iberostar businesses in 2006, went under with over 600 million euros of debt. Its collapse is a story in its own right, and one that I have previously written about, but it was a collapse that was a sort of corollary to the much bigger story, the failure of Grupo Marsans.

Less than three months before Orizonia filed for bankruptcy, it had been one of the companies which had been instrumental in the investigation of and arrest of Gerardo Díaz Ferrán, the former boss of Marsans. Orizonia had an interest in one particular part of the Marsans empire, the Hotetur hotel division, which was controlled by a separate holding company, Teinver. Through Hotetur, Marsans owned the Bellevue hotel complex in Alcúdia.

In late 2010, it became known that mortgages had been taken out on Bellevue. Two were for banks. The third, and the largest, at more than 30 million euros, was for Orizonia. By this time, Marsans had collapsed. Teinver and other parts of the Marsans empire had been bought in June of 2010 by an investment company, Posibilitum. The intention had been that Bellevue was to have been auctioned off in February 2011. It wasn't. But then a further option arose. This was that the management of Bellevue might be shared. Orizonia would be one partner. The other would be Al Andalus Management, which had been appointed by Posibilitum as the management company for the complex.

This option, even if it had ever been realistic, ceased to be one when Orizonia collapsed. Its hotel wing, Luabay, which would have been part of the joint-management scheme, was sold to Be Live Hotels, part of the Globalia group. But then there came the formal denuncia that Orizonia, along with Meliá Hotels, AC Hotels and Pullmantur, lodged against Marsans' owners, one of whom has since died. There was a third name on this denuncia, Angel de Cabo of Posibilitum. In the denuncia, it is stated that there were fictitious sales of companies belonging to the Marsans owners. One of them was Teinver.

What emerged was that this had all been a scheme to hide assets from creditors. They were transferred to Posibilitum. It was said that a sum of up to 600 million euros had been paid. The denuncia states that Posibilitum had capital of only one tenth of this amount in 2009.

Díaz Ferrán and de Cabo were both arrested and both sent to prison, awaiting trial. Bail was placed on both of them. In de Cabo's case, it was set at 50 million euros, an amount that was progressively reduced, so much so that in July, de Cabo was released on bail of 300,000 euros supported by assets worth double that amount. He is still to stand trial, as is Díaz Ferrán, but in the meantime, what has happened with the businesses that were caught up in this affair? Bellevue, for example.

In August 2010, Al Andalus, the company put in management charge of Bellevue, bought the BlueBay brand from Posibilitum, a brand which itself was under the Hotetur umbrella. Bellevue has since become a brand of its own, operated by BlueBay which took out contracts to lease Hotetur hotels for a period of ten years.

So, insofar as anything can be said to be clear about this whole affair as it has impacted on Bellevue (and the Lagomonte in Alcúdia), it is that BlueBay are the rightful managers of the hotel. But then who ultimately owns it? Presumably Posibilitum, despite the allegedly fictitious sale from Marsans or a sale that was not of the size which had been claimed. There again, what of that old mortgage that Orizonia had on Bellevue? Did it pass to Globalia when it bought the Luabay hotels?

Tangled web doesn't do the affair justice. It's why it has taken and is taking so long to go through various courts, not only one in Palma. For BlueBay, what does it do with Bellevue, a hotel complex which, for most of its existence, has been its own tangled web?

Photo: The Lago Esperanza from Bellevue.

When Giants Collapse: Orizonia

How is it that a travel conglomerate that in the past couple of years could post a rise in turnover of 15% in its retail division and a 46% rise in turnover in its hotel division can be brought to its knees? Orizonia, one of the giants of the Spanish travel and tourism industry, joins a list of recent victims of corporate failure. Spanair, Grupo Marsans, now Orizonia. And there are others.

The positive blackness of the figures from the Orizonia accounts obscured all the negative red ink: a loss and 620 million euros worth of debt. In November last year, Orizonia needed to muster 60 million euros to prevent its collapse. The company thought there was a rescue deal with the Mallorcan Barceló hotel group, but it fell through because Orizonia's banks didn't support the offer. They have instead accepted one from another travel giant, Globalia. José Hidalgo, Globalia's entrepreneurial founder (a sort of Branson minus beard, hair and the all-round irritation factor), is meant to be Orizonia's white knight, riding to the rescue, while 5,000 employees face redundancy, a fifth of them in the Orizonia Palma headquarters. 

Meant to be but not able to. Globalia has sunk 15 million into Orizonia but it will not inject a centimo more until the green light to the deal is finally flashed by the Spanish competition commission. And how long will this take? At least two months, and because a merger between the two companies would create an overwhelming presence in the Spanish travel industry, it could even yet be refused. You would think that it wouldn't be, but then the competition commission looks like having other deals to consider as well.

Globalia had said that it wanted to buy all of Orizonia, but this now seems unlikely. Barceló has come back into the frame and made offers for the Orbest airline (which suspended operations on 20 February) and the Vibo travel agencies. Who's buying what, and already one can hear the lawyers sharpening their pens and preparing for court challenges, is all part of the end-game fallout from a spectacular business collapse. Another one, and another one in the Spanish travel industry.

What exactly is Orizonia? It is a group of tour operators, e.g. Iberojet; travel agencies (Vibo used to be Viajes Iberia); airline (Orbest, which operates nationally and internationally); reception services (Smilo); and hotels (Luabay). It isn't, therefore, an unusual conglomeration of travel and tourism products, but it is this combination of business lines that may well have been its downfall.

Orizonia is also a young company, only some six or so years old. It was formed out of Iberostar when, in 2006, Iberostar's owner, Miguel Fluxá, took what many commentators thought was an unusual step. He sold off much of Iberostar's non-hotel business. Orbest used to Iberworld, just as Vibo was Viajes Iberia, both of them formerly part of Iberostar (indeed Viajes Iberia was really what led to the creation of Iberostar).

Fluxá's unusual step can now be seen as a brilliant act of foresight. In concentrating on the hotels, and so continuing to develop one of Mallorca's outstanding businesses and brands, he shed what were to become more vulnerable business divisions. For example, though Vibo turned in that recent 15% rise in turnover, it, as with other Spanish travel agencies, has experienced a rough ride over the past twelve months, the domestic market in the slump that it is.

The Orizonia demise can, therefore, be characterised as a classic business dilemma between expansion through diverse operations and focus on limited lines of business. Marsans was also a diverse operation, though its financial management and controls, we now understand, were far from stringent, and this lack of governance partly explains why one of its founders is currently languishing in prison.

But there is, some commentators have observed, a peculiarly Spanish style of business that tends to neglect fundamentals such as profitability in favour of a desire for turnover and prestige. Orizonia managed to make a loss on a total turnover of 2,350 million euros. Its growth model, and Luabay exemplified this, was too ambitious. In 2011, it acquired its first hotel in Mallorca and agreed to acquire three more, all the time adding vulnerability to the total business group.

There may be some truth to the claim that Spanish businesses pay too little attention to control, but not all. Barceló, though diversified, is considered to be a well-run company. It is different to the likes of Orizonia and indeed Globalia. It is long-established. More conservative perhaps. But if this means paying attention to the basics, then conservatism is the right course. Orizonia's has proved to be the wrong one. 


Any comments to andrew@thealcudiaguide.com please.