Spain Premier Calls Deutsche Bank CEO to Lobby for Steel Firm

(Bloomberg) -- A long-running battle for the restructuring of steelmaker Celsa Group took an unexpected turn this week when the Spanish prime minister called Deutsche Bank AG’s chief executive officer to push for a haircut on the company’s debts.

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Pedro Sanchez telephoned Christian Sewing on Monday to discuss the situation of the Barcelona-based company and urged the lender to make concessions to the company’s owners, according to people familiar with the matter who asked not to be named discussing private information.

The German bank is part of a group of creditors including also Cross Ocean Partners, Goldman Sachs Group Inc. and SVPGlobal, that have been in a dispute with Celsa and its owners, the Rubiralta family, since the onset of the Covid-19 pandemic.

The call took Deutsche Bank’s management by surprise, one of the people said, since it’s unusual for top executives to receive calls over decisions taken by their investment-banking units. It’s unclear whether the conversation will move the needle in the negotiations. Spokespeople for the Spanish government and Deutsche Bank declined to comment.

Celsa, which was under court protection for more than a year, has recovered thanks to a surge in the benchmark price of construction steel which has almost tripled since April 2020. The company, however, needs to agree on a restructuring plan with creditors before the end of the month to access new funds from a government-backed holding company.

Spain is also due to pass a new insolvency law next month to bring it into line with a European directive and that would tilt the legal situation more in favor of Celsa’s creditors.

The company has asked its lenders to take a 52% haircut, arguing they bought the debt at a deep discount and so would still make a return on their investment. Creditors pushed back and proposed to cut the 2.5 billion-euro ($2.6 billion) debt pile in exchange for taking over a 49% stake. They argue that the company’s owners should share some of the financial pain in order to put the company on a more sustainable footing.

The Rubiralta family is opposed to handing over its equity and has managed to mobilize the Catalan regional government in their support.

Regional President Pere Aragones, an important ally for the Sanchez government, has publicly opposed the creditors, tweeting last week that “it’s time for industry, not the speculative economy.”

The company has also openly criticized its creditors on social media calling them “speculators” and saying they are seeking “short-term returns at the expense of all our stakeholders.” It urged unions and employees to demonstrate against the debt holders.

While both parties improved their offers at the end of last week, disagreement remains over the compensation the Rubiralta family should get out of this situation. Creditors also include Anchorage Capital Group, Attestor Capital, GoldenTree Asset Management and Sculptor Capital Management Inc.

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