By ANA TAVARES news@algarveresident.com
A recovery plan presented in early November by Parkalgar, the Algarve race track’s owner, to save the company from insolvency was approved on Monday (November 26) by the Portimão court.
The plan, which sees the race track’s creditors writing off €40 million in debt, is the fourth Processo Especial de Revitalização (PER) to take place in Portugal; a tool introduced by the government earlier this year to aid companies in serious financial distress but which are still deemed to be economically viable.
Comprising a total debt of more than €160 million, the recovery plan was approved by the project’s two main creditors – BCP bank and real estate developer Bemposta – Investimentos Turísticos do Algarve, SA – which are owed 79% of the total debt. The two firms had the final say regarding the plan’s approval as, according to rules set out, recovery plans can only be passed if creditors approving it account for two-thirds of the debt.
Whilst BCP agreed to write off the debt from around €117 million to €94.3 million, Bemposta will still receive the total €10.3 million owed by Parkalgar.
To assure that all creditors receive at least part of the money they’re owed, they were granted retention rights over the tourism apartments that are being built near the race track by Bemposta (the construction work had been cancelled due to the lack of payment and will now be resumed) and which will serve as debt guarantee.
However, not all seem to be on board regarding the recovery plan, as most general creditors, including Formula One boss Bernie Ecclestone (who is owed €3.2 million plus €206,000 in interest through his company GP2 Ltd) and Superbike World Championship organisers Infront Motor Sports Organisation (€1.3 million), will see their credits reduced by 70%, from €23.5 million to €6.6 million. In addition, the court decided that the common creditors will have to forgo the total amount of interest, as well as any potential compensation claims.
According to Portuguese newspaper Público, common creditors have been trying to refute the plan ever since the PER was initiated, with some saying that BCP and Bemposta should not have had voting rights as they will receive the entirety of the indebtedness to them, which violates “the principle of equity”.
On the other hand, the bank and real estate developer claim that they will also suffer from the cuts, namely when it comes to interest and debt guarantees.
With the approval of the recovery plan, Parkalgar is now hoping to receive a capital injection of €10 million, which will be used to resume the construction of 160 apartments by Bemposta, as well as a 200-room hotel near the race track.
However, it is still unclear when the project will start to move forward, as the government has not yet made available the €220 million for the Revitalizar programme, which will encompass and finance the PER recovery plans.
As part of Parkalgar’s recovery plan, the Algarve race track will have to cut its fixed costs, including staffing by €350,000 a year, as well as cancelling many of its international events unless they find definitive sponsors.
In fact, many international events held during the early years of the project were financed by public entities, such as Portugal’s Tourism Board and the Algarve Tourism Board, the Portuguese Sports Institute and Portimão Câmara.
Another project put on the back burner is the creation of a technology park near the race track, which would serve as a technology cluster for the automotive industry.
Parkalgar’s debt problems began in 2009 when it failed to receive around €41.4 million euros from Irish investors Harte Holdings to fulfil its property ambitions at the race track site.
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