MercoPress. South Atlantic News Agency

Debt strapped Spanish builder wants out from Repsol-YPF

The impact of Spain's housing market crash has a new chapter: construction company Sacyr Vallehermoso SA is considering selling its 20% stake in oil major Repsol-YPF, as it struggles with a sinking property market and soaring financial costs, according to an announcement released Friday by Spain's Markets Commission, CNMV.

The debt-strapped company which sold its 33.3% in France's Eiffage SA in April said it was considering options on all its assets. Sacyr and Repsol shares soared as investors welcomed the prospect of Sacyr paying down some of its debt burden and Repsol getting rid of a stakeholder in an unrelated industry. However a Sacyr spokesperson declined to say whether the group had been approached by potential buyers for the Repsol stake. Sacyr is one of many Spanish construction companies fighting a three-way squeeze from falling property prices, rising interest rates and reduced access to bank lending. One of the diversified builders most exposed to a fast-deteriorating property market, Sacyr reported debts of 18.2 billion euros (27 billion US dollars) on September first, dwarfing its market value of 3.5 billion at Thursday's closing price. But some market experts said Sacyr would be more likely to sell other assets such as rental property unit Testa and infrastructure company Itinere before taking big losses on its Repsol stake, since it bought Repsol shares at above 25 Euros. . Sacyr shares on Friday were trading at 13.39 Euros and Repsol at 19.78 Euros. The 4.6 billion Euro value of the Repsol stake at Thursday's closing price is greater than Sacyr's market value, but is substantially less than the 6.5 billion euros, or 26.7 euros a share, Sacyr paid in 2006. Sacyr's entry into Repsol was one in a series of purchases in the energy business by Spanish builders seeking to soften the blow from an expected construction sector slowdown. However Repsol shares have been punished in a global economic downturn and by its failure to increase oil reserves. Adding to complications, the loan taken out by Sacyr to buy the Repsol stake was secured against Repsol shares. When Repsol shares fall below a margin call level, which will rise to 24 euros per share from December this year, Sacyr must put up more guarantees. These guarantees usually take the form of Testa shares According to a recent Santander bank research not financial costs are also rising for Sacyr since 61%of its debt is at floating rates, with interest rates on a clear upward trend.