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Colony and Orion JV to buy €1.5bn Spanish debt for €950m

California-based Colony Capital and London-based Orion Capital Managers are to buy up to €1.5bn of debt from Goldman Sachs loaned to struggling Spanish property company Colonial for €950m. The partners "stand to profit handsomely" from the deal, The Wall Street Journal said.

Colony Capital Partners and Orion Capital Managers have joined forces to purchase up to €1.5 billion of debt loaned to embattled Spanish property company Inmobiliaria Colonial from Goldman Sachs, for approximately €950 million.

Few details on the transaction are available, but according to a report by European commercial real estate magazine Europroperty, the deal would mark an exit for the Wall Street Bank from its commitment to the company, which has been one of the biggest victims of Spain’s severe real estate downturn.

The Barcelona -based company reported a €369.2 million loss in its third quarter results. This contrasted with a €2.5 billion loss for the same quarter last year but was as a result of some large valuation write-downs.

Colonial’s debt totaled €6.4 billion at the end of September. Other lenders to the company, which owns assets including offices in Madrid, Barcelona and Paris as well as residential assets across Spain, include Calyon, Eurohypo and Royal Bank of Scotland.

Colonial is in the midst of refinancing its debt with its lenders and hopes to conclude negotiations by the end of the year.

According to a report by the Wall Street Journal, Colonial is believed to have agreed to value the debt at 100 percent which means that Colony and Orion would receive and steep discount. In the report, the newspaper said the partners “stand to profit handsomely if Colonial shares appreciate.

Shares in Colonial traded today at €0.17 reflecting a market capitalization of €293.5 million.