Risanamento shares up on hopes will escape bankruptcy

* Court could decide this week on bankruptcy

* Group needs to downsize plan for key Milan development

* Shares up nearly 7 percent in second day of gains

By Danilo Masoni

MILAN, Nov 2 (Reuters) - Shares in Italian real estate company Risanamento SpA (RN.MI) rose sharply on Monday for a second consecutive session on hopes the debt-laden group will escape bankruptcy when a court eventually decides its fate.

The group behind the huge Milan development of Santa Giulia became the biggest Italian real estate victim of the financial crunch, as falling property values and the end of easy lending made its 2.9 billion euros ($4.3 billion) of debt unsustainable.

A court is expected to decide as soon as this week whether to declare Risanamento bankrupt or clear the way for a 500 million euro restructuring plan the group had agreed with five creditor banks led by Intesa Sanpaolo SpA (ISP.MI) and UniCredit SpA (CRDI.MI).

The stock was up 6.4 percent to 0.472 euros at 1443 GMT, following a strong rise on Friday.

"It's up because it isn't already bankrupt and in any case they won't let it go bankrupt," said Stefania Guetta, a trader at Miilan brokerage TWICE said.

On Saturday, Risanamento said it had drawn up a list of candidates for a new board which will lead its restructuring -- providing the court rejects a prosecutor call for bankruptcy -- in a sign of confidence over its future. [ID:nLV114215]

A decision by the Milan court, initially expected on Oct. 15, was delayed to an unspecified date. [ID:nLF640067]

The prosecutors requesting bankruptcy say the restructuring would not solve Risanamento's insolvency. But banks and residents of half-finished Santa Giulia hope bankruptcy will be avoided.

BIG BUSINESS

Real estate experts said if the company escapes bankruptcy, Risanamento will have to draw up more realistic plans for Santa Giulia, along with selling assets.

The original plan for Santa Giulia, a southern Milan area less than 4 km from the city centre, included 1 million euro luxury flats designed by British architect Norman Foster.

"If overambition hadn't taken the project out of the market ... today (Santa Giulia) could have been completed and it probably would have been big business for Risanamento," said architect Paolo Caputo, who designed the project's urban plan.

Media tycoon Rupert Murdoch's Sky Italia offices occupy one building at Santa Guilia instead of two, since construction of the second has ground to a halt, while its luxury stores and flats exist only paper.

There is no adequate parking and a four-lane interconnection road ends in an earth embankment. The undeveloped park area is a breeding ground for rats. "We call this nature's oasis," Stefano Bianco, head of a residents' association, said as he toured the site with a Reuters reporter.

However, Risanamento -- advised by Leonardo & Co and Bain & Co -- is expected to keep control of Santa Giulia and sell other projects and property as part of the restructuring.

"My ambition is to shrink Risanamento back to Santa Giulia," said Vincenzo Mariconda, the new chairman, in an interview with the Financial Times last month.

Risanamento's other key project is Falck, a 1.3 million square meter area in north Milan, where no construction activity has started, making any plan to relaunch it riskier.

Risanamento's restructuring plan aims to sell Falck for 450 million euros by the end of 2012, according to a court document filed by prosecutors. (Editing by David Holmes)