The smaller creditors of Parkalgar, operating company of the Algarve’s Autodrome, have been left out in the cold as the two big companies that account for 79% of the debts voted in favour of the risky rescue package which has been accepted by Portimão court.
“The principle of equality" for small companies means nothing in this instance as they may be lucky even to recover 30% of the monies they are owed.
The Special Revitalization Process (PER) may help Parkalgar out of its immediate crisis but so much needs to go right at the same time in an appalling property market. Many close to the process cannot see this rescue package working.
Parkalgar is legally now able to avoid paying €40 million to the two main lenders, Banco Comercial Português (BCP) and local construction company Bemposta.
This is only the fourth Special Revitalization Process (PER) to be approved by a Portuguese court in the six months since the new raft of laws came into being but one of the criteria is that the court must see that the plan is a viable one.
The recovery plan put forward by Parkalgar was rejected by the smaller lenders but the two prime lenders held the majority needed, a combined total of 79%. The unsecured creditors are owed €23.5 million include Bernie Ecclestone’s GP2, which is owed €3.2 million, plus €206,000 in interest.
The Parkalgar recovery plan includes staff cuts of €350,000 annually, which may be easy as many races and events now will no longer be booked at the circuit due to the uncertainty of the racetrack’s finances and recovery plan. The autodrome's finances are no longer being propped up by Portuguese taxpayers through Tourism of Portugal, Algarve Tourism, Sports Institute of Portugal and Portimão council.
With this favorable ruling, Parkalgar may now receive an injection of €10 million to pay Bemposta to carry on building the 160 apartments that may struggle to find buyers, as well as the construction of the nearby hotel.
Postponed due to an almost universal lack of interest, the technology park planned for the site is to continue with new funding.
At the end of the day the market will decide if it wants to contract for races at the Autodrome, whether it is worth the risk in buying the apartments or owning a hotel on the site.
The two big creditors take a haircut now and the builder has some money to carry on building. Should the whole house of cards fall and the venture be unable to keep to the new targets agreed in court, the physical assets will be taken over by the bank and the builder, assets which might be worth something to someone, someday, but at a fraction of their construction cost.