Economy

Esther Koplowitz, Spain's Embattled Construction Queen

One of Spain's richest women is up against banks insisting she pay back her debts. How did the heiress to the Koplowitz construction dynasty come to this?

FCC heiress Esther Koplowitz
FCC heiress Esther Koplowitz

MADRID — Like any dynasty worth its name, the Koplowitz family has had its share of drama. Today, the destiny of its saga depends on the negotiating skills of Esther Koplowitz, who inherited her share of Spain's premier construction firm 52 years ago as a child, after her father Ernesto died in a horse-riding accident.

Koplowitz, now aged 61, is trying to renegotiate company debts of around one billion euros, according to two sources close to negotiations who asked not to be named. Her current predicament follows the decision in 1998 to take on the largest loan ever given a person in Spain, so she could buy her sister Alicia's share of their firm, FCC (Fomento de Construcciones y Contratas SA). Esther now controls 50% of FCC, according to regulators' documents.

Some 85% of Spanish firms are still family-owned, according to the Family Business Institute. But in recent years, certain dynasties have faced some rough times, including too much debt, strategic failures by the second generation and six years of recession that have hit Spain's economy as a whole.

"In the good years there was a lot of leverage in Spain. Now the hour of reckoning has come," says Nicolas Véron, a fellow of the Bruegel think tank in Brussels. "Generally they do not wish to give up control, so they finance their growth too frequently with debt."

Koplowitz will be the first to know whether or not she will be heading the next chapters of her firm's 114-year history. Conversations with her creditors BBVA and Bankia were said to be "progressing" in mid-September, a firm communiqué stated, though a spokesman for FCC (whose shareholders include Bill Gates and George Soros) would not comment.

Easy money

Spanish banks, some of which have faced their own restructuring after a 41 billion-euro bailout of the sector in 2012, are less inclined these days to extend credit deadlines. Or indeed to lend: Banks loaned a total of 527 billion euros in 2011, compared to 179 billion in the first half of this year, according to Bank of Spain figures.

There was a time when "family firms had the type of relationship with their banks that meant very easy and very cheap money," says Ismael Crespo, a political science lecturer at the University of Murcia in Spain. "They refinanced with more debt. When the system failed, they were trapped."

Other Spanish dynasties are feeling the heat. Like the Polancos, whose share of the PRISA media group that owns the newspaper El País, has fallen from 64% in 2007 to 19.5%. Or the gambling realm of Codere owned by the Martínez Sampedro family, which, after struggling for over a year, agreed on Sept. 23 to hand over its majority stake to creditors.

Resisting the temptation to borrow has however helped other prominent Spanish families to prosper. The owner of Zara clothes shops (Inditex) Amancio Ortega, cut costs and expanded abroad without debt. Inditex has increased its profits every year after going public on 2001, and Ortega is today the world's fourth richest man.

Most of FCC revenues come from environmental services. Its web page cites a selection: It has installed cables in Libya, collected trash in Venezuela, the Dominican Republic and the United Kingdom, managed waste in Cairo, Buenos Aires and Bengbu, built bridges in Bulgaria, Romania and Los Angeles, motorways in Poland, a metro station in New Delhi, a hospital in Northern Ireland and a hydroelectric dam in Portugal. Beside these, projects for the Panama Canal, a port in Brazil, a desalination plant in Algeria, and shopping malls, airports, air bases, tunnels under the sea, train stations and museums in Spain and many other places.

The sheer volume of activity meant that the family could not maintain the pace, says José Antonio Gómez Yáñez, a Madrid consultant who works with politicians and firms.

"The Koplowitz sisters' management capabilities were not on a par with their father's. Over the years, the family's ties with firms and banks began to fade. FCC became too big, which prompted the problems affecting it now," he said.

The firm's expansion was derailed by the collapse of the Spanish stock market in 2007 and the bankruptcy of its Austrian branch, which had been registering losses since 2012. FCC, with total assets of 14.5 billion euros, declared in June a debt of 6.4 billion euros, a small drop from the 7.1 billion euros of debt declared in 2012.

FCC was formed with the merger of Conycon (Construcciones y Contratas) and Fomento de Obras y Construcciones, founded in 1900. Esther's father Ernesto, who had fled the Nazis in his native Upper Silesia, formed Conycon in 1944 with a loan from a friend. The firm began to participate in rebuilding infrastructures destroyed during the Spanish civil war of 1936-1939.

The Alberto cousins

Koplowitz had two children outside of marriage. In 2003, she married Fernando Falcó y Fernández de Córdoba, the third Marquis of Cubas, with whom she had two daughters, Esther and Alicia. Her husband and lover sat next to each other as directors of Conycon, according to Hoover's User Guide, a listing of world companies.

Before that Esther and Alicia had married two cousins, both named Alberto. In the 1980s "the Albertos" ran the firm, Hoover's states. After divorcing their husbands, the sisters took over Conycon and two years later, merged it with Fomento de Obras y Construcciones.

"There was a time when the Koplowitz sisters and the Albertos were very visible in society," says Crespo of Murcia University. After the divorces, they began to shun most public events.

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