Colonial's shareholders have asked the Investment Corporation of Dubai (ICD) to make changes to a takeover bid worth more than 3 billion euros ($4.53 billion), the Spanish property company said on Thursday.
Colonial shares plunged as the news added to a pile of doubts that the bond-and-cash deal will come to fruition. At 1149 GMT, the stock was down 14.7% at 1.34 euros.
When ICD first declared its interest in the ailing firm earlier this month, it said former chairman Luis Portillo and the Nozaleda family, who together own 52% of Colonial, had agreed to sign up to any deal.
In a statement on Thursday, Colonial said its shareholders wanted more information about the bid, and hoped to make a decision as soon as possible.
Colonial has attracted various potential bidders since its share price slumped in December as shareholders unwound derivative positions on its stock, which was already falling on worries about a sudden slowdown in the Spanish property sector.
The share slump forced Portillo out of the chairman's position and the highly-indebted company then sold various assets to maintain cash flow.
ICD is the only bidder to have put forward an offer but even that is conditional on the sovereign wealth fund reaching an agreement with Colonial's creditor banks - Goldman Sachs, Royal Bank of Scotland (RBS), Eurohypo AG and Calyon - within three working days.
ICD also needs to reach an agreement within five days with banks that lent Portillo and Nozaleda money to buy stock. Some of those deals assumed a Colonial share price of 3 euros so the lenders are already facing unwanted losses.
"ICD has managed to create a conflict between investors and creditor banks as they will fight to get the pieces of a shrinking pie," said a source close to the deal, under the condition of anonymity. "This deal is still very uncertain."
ICD is pushing for a discount, or improved conditions, on Colonial's 4.66 billion euro syndicated loan.
If the banks agree to a discount, they would have to book a loss on the loan but if the deal falls through they could face bigger writedowns or have to take on Colonial assets themselves, seeing as the company has already breached covenants.
Holding real estate is out of vogue at a time when the Spanish market is suddenly slowing after nine years of growth. However, Colonial does have some attractive, high-quality rental properties in Madrid, Barcelona and Paris.
ICD has said it cannot value the assets it might sell if the deal was approved. Colonial values its assets at 12 billion euros and owns 15% of construction group FCC.
FCC Chief Executive Baldomero Falcones said on Thursday he expected to find synergies if the ICD bid went through and said that if it did not come to anything, plenty of institutional investors were interested in buying Colonial's FCC stake. (Reuters)For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.