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.

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 creditors' agreement

The immediate future of the Bellevue hotel complex in Puerto Alcúdia and of staff employed at the hotel has been secured. An agreement with creditors regarding some 100 million euros owed by Bellevue's former management company, White Horse, which went into administration following the bankruptcy of its parent company, Marsans, in 2010, has been obtained by the new owners of White Horse and Bellevue, Posibilitum, as part of court proceedings into the affairs of White Horse. What remains to be seen is whether a joint management of the Bellevue site, one that would involve a creditor, Orizonia (Luabay), will be pursued, as has previously been suggested.

MALLORCA TODAY - Nueva Rumasa hotels sold

The Hotasa hotels of the Nueva Rumasa conglomerate have been sold in a package that will see much of the collapsed company pass into the hands of the investment group Back In Business (Posibilitum); Posibilitum it was that came to the rescue of Hotetur (Bellevue in Alcúdia) when Grupo Marsans collapsed. The Hotasa hotels include three in Can Picafort.

For Sale: Hotel, Needs Work

The possibility that the Posibilitum investment group, the owners of Alcúdia's Bellevue complex, might acquire the Hotasa hotels of the troubled Nueva Rumasa conglomerate should be viewed as welcome news by those running the hotels. I am told that the hotels are experiencing difficulties in providing services they should be. When the hotels opened for the season, and at one point it looked as some might not, suppliers made it clear that they would supply only on a cash-on-delivery basis.

The Hotasa hotels, which include three in Can Picafort, are an extreme case, but they are far from alone in having owners seeking buyers. Much of Mallorca's hotel stock is up for sale. And there are very few buyers.

The accord between tourism minister Carlos Delgado and the hoteliers that should pave the way for reform of the tourism law and so facilitate hotel conversion and change of use has been sought by the hoteliers for some years. The antiquity of many hotels makes their redevelopment a pressing necessity, but even with agreement and legal reform, a question would remain. How would these conversions be funded?

Delgado has said that the days of expecting grants, especially from central government, have passed. The banks have all but turned the taps off. The markets are reassured by this summer's rise in tourism numbers, but the leading hotel chains - and those which would be listed and more attractive to investors - have tended to look overseas for growth potential.

The hype of all the talk of hotel renovations and changes of use and the unions getting hot under the collar and threatening protests as a consequence may therefore be just that - hype. Some hotels and hotel chains are in good enough shape to effect changes, but many are not.

One reason why owners want to sell hotels and why it is proving difficult to do so and would also prove difficult to convert them is because they are that old that the cost of conversion would be nigh on prohibitive. Buyers are unlikely to take on hotels that demand significant investment in addition to what are sales tags which are too high. Like with many restaurants or bars that are for sale, the expectations of owners are unrealistic, based on past or expected performance and divorced from the circumstances that now obtain.

Bellevue, though taken on by Posibilitum, is a case in point when it comes to old stock. The complex, all 1400 apartments of it, is nearly 40 years old. Its sheer size is a constraint on renovation as is its age, but renovation is badly needed. Bellevue has acquired a more diverse market over the past few years - it isn't the ultra-Brit complex it once was - but it tends to be hotels for the British market in the resorts of Alcúdia and Magalluf that are the oldest and which attract less profit because of the very nature of the particular market they cater for. Another reason, therefore, why prospective buyers might be wary.

A further reason is the complexity of financing arrangements and ownership issues. The travel and hotel group Orizonia had, still has as far as I am aware, a mortgage on Bellevue which was raised as a guarantee against a debt to the company run up by the previous owners, the now bust Grupo Marsans. And there is a similar story with Hotasa.

Bank funding requires security, and in the case of Hotasa, the house has well and truly been bet. The court bankruptcy proceedings relating to Nueva Rumasa have revealed the scale of the mortgages that hang over Hotasa. One hotel alone, Santa Fe in Can Picafort, has been used as a guarantee four times, to which can be added the embargo slapped on it by the Hacienda in respect of a debt of some 120,000 euros. In total, the seven Hotasa hotels in the Balearics have mortgages valued at just short of 138 million euros, three and a half times the size of the mortgage debt said to be owed to Orizonia.

The judge presiding over the proceedings has been obliged to appoint five administrators because of the sheer complexity of the hotels' affairs. The labyrinth of different companies in addition to the various mortgages would surely make a purchaser riding to Hotasa's aid, be it Posibilitum or any other, pause while the administrators try and unravel the affairs. Hotasa may be a specific case, but who's to say what complexity might apply to other hotels or hotel groups and which might add to deterring prospective purchasers.

Outdated, unprofitable, underfunded, debt-ridden: the reasons why there are so few buyers for hotels and why the much-hoped-for conversions may yet never take place.


Any comments to andrew@thealcudiaguide.com please.