We’ve got a breakthrough! Oh no, that was slightly too optimistic. Wait, there’s hope again! Uhm, perhaps not anymore.
This is more or less the story of Valencia’s Nuevo Mestalla. In the last year, we have twice reported on good news and renewed hope that construction of the new stadium may finally resume again, but this is every time followed by a setback.
What’s more, the latest signals are that works are not going to be resumed any time soon. The bad guys this time are Bankia, the toxic bank that has been downgraded to junk bond status, that has been partly nationalised by the Spanish government, and that recently needed a €19 billion bail-out.
That’s indeed not a party you want to do business with right now, but Valencia do not have much choice, because they went into business with them over 5 years ago.
To be fair, it was first Valencia that started defaulting on their obligations, which was why the construction of the new stadium got halted in 2009. But whereas the club slowly got their act together, things deteriorated quickly for Bankia.
Still, both parties reached an agreement late last year on the financing of the remaining part of the project, estimated to cost €150 million. Part of the deal was the sale of the site of the present Estadio de Mestalla and some other assets to Bankia, which would pay off the existing debts and then allow for further financing of the remaining works.
It says something about the Spanish real-estate market that in 2006 Valencia had valued the site of Mestalla at €500 million, but that the club is currently aiming for a more modest €225 million.
There were some further conditions the club and city of Valencia had to comply with, but these got all sorted out over the summer. Valencia then announced the resumption of works in September, which is right now, but no construction workers have been spotted yet at the building site.
They are likely not going to arrive any time soon, as Valencia have now announced that they currently have no fixed date set for resumption of the works.
The culprit appeared to be Bankia, who have thus far failed to commit to the project and instead put it on stand-by. The real reasons for this are unclear, but it is obvious that the project remains highly risky and the money is just not enough to make the gamble. The bank cannot put any more toxic deals on its books in its current state. The uncertainty on what it can get for the site of Mestalla, now estimated to be as low as €150 million, does not help.
The problem for Valencia is that they don’t have any other option than to wait and hope the bank comes around. They cannot fund the project themselves, no other bank is likely to take the risks, and if Bankia pulls out and breaks the deal, the club will be very near to bankruptcy.
In the meantime, Valencia keep complying with their obligations, which means an interest payment of €15 million a year. With nothing to show for, that is very decent money that can now not be spend on the pitch.
Of course, the project is just one signature away of getting resumed and construction trucks may be driving up the site tomorrow, but one would advise the Valencia fans not to get their hopes up this time.
Photo credits: © Flickr user Olmo Axayacatl