Second Spanish property firm goes insolvent: paper
MADRID (Reuters) - Basque property developer Ereaga has filed for creditor protection, El Pais newspaper reported on Sunday, the second Spanish real estate company to declare insolvency as sales slow and banks cut back their financing.
The paper said privately held Ereaga had filed for protection in the mercantile court of Bilbao because it could not meet payments on 160 million euros ($233 million) of debt.
Nobody was immediately available for comment at Ereaga's offices.
The filing comes two months after Llanera, a property firm based in Valencia, asked for creditor protection. Since then, several other real estate companies have tried to sell assets or refinance their debt to ride the drop in the housing market.
The Spanish property sector has rocketed over the last nine years but is suddenly screeching to a halt with house sales falling and price growth slowing quickly.
While developers were confident that they would have a soft landing, the U.S. subprime mortgage crisis suddenly made banks much more wary of lending to them and even if they do get a loan, they are being charging ever higher risk premiums.
Real estate developers built up hefty piles of debt to build projects and until this year could pay it back quickly as houses were sold almost as soon as they were built.
Firms are now looking for other ways of riding out the crisis and lowering their debt burden.
In the last week alone, Colonial (COL.MC) has said it is in talks with French property group Gecina (GFCP.PA) about possibly merging which would lower its debt-to-asset ratio, Fadesa (MFAD.MC) has sold half its Moroccan unit, and privately held Habitat has put property up for sale.
Investors have also turned shy on the Spanish property market with most listed companies' shares falling over the year.
On Friday, real estate firm Tremon pulled its initial public offering because investors were not willing to pay as much as the group wanted per share.
(See www.reutersrealestate.com for the new global service for real estate professionals from Reuters)
(Reporting by Jane Barrett, Editing by Erica Billingham)
