UPDATE 1-Metrovacesa in talks with HSBC to extend HQ loan

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MADRID, May 19 (Reuters) - Spanish property firm Metrovacesa (MVC.MC) has asked HSBC (HSBA.L) to extend an 810 million pound ($1.58 billion) loan it took out to buy the bank's headquarters, because troubled credit markets have meant it could not issue bonds as planned.

Metrovacesa bought the headquarters of HSBC, Britain's largest bank, for 1.09 billion pounds in May last year and had been due to pay back the 810 million pound loan after six months.

That loan was extended by a year to November 2008 but Metrovacesa said financial markets were such that it could not issue mortgage-backed securities as planned to pay for the building in London's Canary Wharf district, so it was talking to HSBC about extending the loan again.

"The company is negotiating with HSBC the refinancing of the loan, with a view to converting it into a medium-term syndicated loan (5 years) in the expectation that a recovery in financial markets will allow Metrovacesa to extend the duration of this loan to at least 20 years," it said in a statement.

Metrovacesa shares were down 2.3 percent to 65 euros in very thin trade in the stock on Monday, compared to a 0.6 percent rise in Spain's blue-chip index .IBEX.

The Spanish company also said in the statment that it had signed an agreement with Legal & General (LGEN.L), ending a threat by the British insurer to sue Metrovacesa over disputed conditions in the sale of a major London office development.

The agreement, details of which were not given, means the Walbrook Square deal -- in which Metrovacesa is paying 240 million pounds for the central London office -- will go ahead, Metrovacesa said. (Reporting by Ben Harding, editing by Elizabeth Fullerton)