Sabadell trades blows with Cerberus in €365mn lawsuit | USAEMALL.com

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Spanish bank Sabadell has traded blows with US private equity group Cerberus in a €365mn London lawsuit over a soured multibillion-euro property deal.

The case, which concluded on Friday, is one of the highest value banking disputes before the High Court and comes as Sabadell faces a hostile €11bn takeover bid from domestic rival BBVA.

Sabadell sued Cerberus over claims the New York-based group failed to pay what it owes for the purchase about five years ago of distressed Spanish property portfolios covering tens of thousands of units.

The dispute has its origins in the high exposure to Spanish property that Sabadell, which owns TSB in the UK, built up through acquisitions that helped transform it from a regional niche bank into one of the largest lenders in Spain.

Sabadell sought to reduce its exposure to the sector in the aftermath of the financial crisis, which hit Spain particularly hard and led to many property loan foreclosures.

The bank agreed to sell an 80 per cent interest in three portfolios — known as Coliseum, Challenger and Rex — to Cerberus in a deal that completed in 2019, covering a range of properties including offices, warehouses, shops, apartment blocks and houses.

Under the terms of the deal, Sabadell allowed 20 per cent of payment to be deferred. This was because some of the properties were “unregistered”, meaning in effect that their ownership had not been confirmed with the Spanish land registry.

The arrangement between Sabadell and Cerberus meant that part of the payment was contingent on the bank subsequently registering properties with the land registry.

However, the details of the contract wording — and, in particular, what sums were due if a value threshold for the properties that remained unregistered was not met — was subject to dispute.

James Collins KC, acting for Sabadell, told the court that there was “no real doubt” its interpretation of the deal was correct. “It is the only construction that makes sense,” he said, adding that Cerberus’s interpretation was “economically absurd”.

But Andrew Scott KC, for Cerberus, countered that the meaning of the deal was “plain and unambiguous”. He said the deferred sum was not due as a threshold for payment was “not met”.

The judge, Mr Justice Andrew Baker, said on Friday that he anticipated handing down his ruling before Christmas.

Additional reporting by Barney Jopson