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.

Hidden Assets: The Marsans scandal

The surviving business partner who ran what was once Spain's largest company employer has been arrested. Gerardo Díaz Ferrán formerly headed up Grupo Marsans along with Gonzalo Pascual, who died six months ago, and was also formerly the president of the CEOE, the Spanish equivalent of the CBI. He was detained on Monday, accused of money laundering and non-declaration of assets.

Díaz Ferrán's arrest is the latest twist in the ongoing investigation of the bankrupted Marsans, and Díaz Ferrán is the latest Spanish über-businessman with a strong Mallorcan connection to be collared by the police. Of others, José María Ruiz-Mateos, owner of another failed company, Nueva Rumasa, is accused of diverting money raised by mortgaging hotels in the Hotasa chain, of which there are several in Mallorca. Nueva Rumasa, in its original incarnation before it was expropriated by the Spanish government in 1983 because of its massive debts, was Spain's biggest company, so in that previous incarnation it was as important a business as Marsans was prior to its collapse in 2010.

Díaz Ferrán and Ruiz-Mateos are both high-profile businesspeople, though arguably neither is as high profile as Iñaki Urdangarin, the King's son-in-law, if only because neither of them has royal connections. Urdangarin is the third party in what is a pretty unholy businessperson trinity, even if the money involved in the case against Urdangarin is small beer when compared with that which is involved with both Marsans and Nueva Rumasa.

One aspect of the case against Urdangarin that has been investigated is the alleged channelling of money offshore. Díaz Ferrán faces a similar investigation, and the timing of his arrest is probably no coincidence as it has followed swiftly on the period of the amnesty for declaring previously undeclared assets having ended.

The investigation of Díaz Ferrán has been prompted in part because of complaints lodged by the likes of the Meliá hotel group and the Orizonia travel company. These complaints extend beyond Díaz Ferrán and include Ángel de Cabo, who has also been arrested. De Cabo is significant in all this, and especially so for Mallorca. Not only has he acquired some Nueva Rumasa businesses, his investment vehicle, Posibilitum, acquired Marsans businesses, one of them being Hotetur, of which Alcúdia's huge Bellevue hotel complex is a part. The complainants refer to the "alleged sale" for 600 million euros of Marsans to Posibilitum just prior to Marsans being declared bankrupt; this purchase has alternatively been described as having been made with a "nominal sum".

De Cabo, according to the police, acted as a sort of front man for Díaz Ferrán, and received a significant sum for doing so. The thrust of charges is that assets were syphoned off and hidden to avoid demands against Marsans that exceeded 400 million euros.

To say that the whole affair is complicated would be an understatement, and it is one that highlights links and relationships at the grandest corporate level which impact on Mallorca and Spain's tourism industry. One such link is that between Marsans and Orizonia. The latter is owed money by Marsans. The guarantee against this money was Bellevue, and the future management of Bellevue has been (and still is, as far as I am aware) the subject of a separate judicial examination to decide the fate of Hotetur. A proposal to split the operation of Bellevue between Posibilitum's management company and Orizonia's Luabay hotel division appears to still be up in the air. It is likely to be even further up in the air now that De Cabo has been arrested, now that questions about Posibilitum's acquisition of Marsans are being asked and now that, to make matters even more complicated, the Barceló hotel group has offered to buy Orizonia, subject to agreement by the Spanish competition commission. The uncertainty that has surrounded Bellevue throughout its 40 years of existence just refuses to go away.

Coming on top of political corruption cases and of the dire economic situation, the cases against the unholy businessperson trinity are all damaging: Ruiz-Mateos, because he has long sailed close to the wind; Urdangarin, because of his connections; and now Díaz Ferrán. Of the three, his case may prove to be the most damaging for what remains of Spain's reputation. Former president of the Spanish business confederation, former owner of a massive company at the heart of the tourism industry; it doesn't get much worse.

Though the Díaz Ferrán case is not exclusively a Mallorcan issue, the affair does have strong Mallorcan links. Political corruption had come to be pretty much expected in Mallorca. Now there is business scandal as well, and you wonder how much more there might be to come.


Any comments to andrew@thealcudiaguide.com please.

MALLORCA TODAY - Bellevue to be split into two hotels?

The ongoing judicial saga relating to the financial and administrative affairs of the Hotetur hotel chain and its wholly-owned management company White Horse has taken a new turn, one that specifically relates to the giant Bellevue complex in Puerto Alcúdia.

An agreement appears to have been reached between the Blue Bay group (Al Andalus Management) which is currently running Bellevue and the Luabay hotel division of the Orizonia travel group.

Orizonia has been pressing its claims on Bellevue. These relate to a debt owed to Orizonia of 40 million euros that had been taken on by the previous owners of Hotetur, the now defunct Group Marsans, and for which Bellevue was the guarantee; Hotetur was acquired by the investment group Posibilitum, now the ultimate owners of Bellevue.

A resolution, in the form of the proposed agreement which seems likely to be accepted by both the receivers for Hotetur and the judge overseeing the case, will see Blue Bay and Luabay jointly run the Bellevue site. Moreover, it is understood that documents have been lodged with the Balearic Government's tourism ministry which would enable the complex to be split into two "hotels", albeit that the use of the word hotels is somewhat misleading, given that Bellevue is a series of individual blocks of apartments.

The Rumour Mill: Bellevue

Rumours. It was the regularity with which rumours surrounding Bellevue in Alcúdia surface that was one of the reasons why I spoke with the assistant director last year. Rumours are always circulating about Bellevue. Unfortunately, the contact is no longer there, but even were he it is doubtful that I would get far in asking a question about the current rumour that's doing the rounds - that Bellevue will not be open next year.

There have been previous rumours along these lines, and they have all proven to be false. What is fuelling the current one is nothing directly to do with Bellevue or indeed Hotetur, the chain which operates the hotel. It has to do with the financial problems at Grupo Marsans, the ultimate owner of both Hotetur and the hotel complex. I have referred to these problems before, both here and in "Talk Of The North". Marsans faces demands from creditors, one of which is the travel group Orizonia. A guarantee against a debt of some 40 million euros is Bellevue. Orizonia is demanding payment of this debt and the execution of its mortgage on Bellevue.

It is from this, one assumes, that the rumours are stemming. In the reports of the court hearings into Marsans and its difficulties, there has been nothing about Bellevue closing. The rumours would appear, as so often, to be the result of taking facts (and one can't even be sure that facts are being taken) and moulding them into something without any basis in truth. I have asked people about the sources from which they have heard about Bellevue's alleged closure. They go along the lines of someone who spoke to someone in a bar near to the hotel.

Bellevue stands on some 200,000 square metres of prime real estate in Alcúdia. It can, at a stretch, accommodate 6,000 guests. Orizonia, as with many a hotel or travel group, would love to get their hands on it. It has a hotel division that was created in 2008, into which Bellevue might well fit, though if you go to the website - http://www.luabay.com - and read the over-the-top narrative about how they will "seduce" you, you might be forgiven for thinking that Bellevue might not fit after all.

Of course, there is also a question as to quite how well Bellevue (as with many other hotels) is shaping up under the current difficult circumstances. But this is a separate issue. One finds it hard to believe that there is substance to the rumours.


And who knows, maybe a "new" Bellevue might become the destination for the much-longed-for Russian tourist market. President Antich has been in Moscow, wooing tour operators and predicting that Russia will become the third most important foreign market for Mallorca and the Balearics after Germany and the UK. Germans do not go to Bellevue in huge numbers, which is probably as well. You think there might be a bit of British-German antagonism, well according to some of my German sources this is nothing compared to that which exists between the Germans and the Russians. Hey ho, perhaps it's as well that Russia aren't in the World Cup.


Any comments to andrew@thealcudiaguide.com please.