From Property Professionals -

78.6% RISE IN SPANISH BANKRUPTCIES
Spain, bankruptcy, administration, credit crunch

According to the Spanish National Institute of Statistics (INE), the total number of businesses and individuals in the country declaring bankruptcy during Q1 2008 soared 78.6% y-o-y – 45.7% of which are from the construction and property industry.

The INE figures revealed that of the 425 entities filing for bankruptcy, 386 were voluntary and 39 were without choice breaking down at increases of 95.7% and 5.4% respectively y-o-y.

Of these, 359 were listed as companies – the vast majority of which (277) were private limited entities, 140 of which were involved in the real estate and construction industries.

The region of Cataluna (31) recorded the biggest number of property company closures in the first quarter of 2008, followed closely by Andalucia (30), Valencia (28) and Madrid (19).

Market conditions
The first five months of 2008 have produced a long list of casualties in the Spanish property sector as many developers are forced to close or file for voluntary administration to prevent a forced liquidation of their assets.

The latest in a long line is San Jose Inversiones which applied this month for ‘concurso de acreedores voluntario’ or voluntary administration. This allows companies in Spain a period of time to try and renegotiate the terms of its debt with its creditors. If a company fails to do this then it will eventually end up in liquidation.

It is believed that despite having assets to the value of €300m, it was recently unable to meet repayments to its creditors of around €30m as banks become loathe to lend to the property sector as demand for product has fallen significantly.

Another casualty has been developer Idearco, which has reportedly shut its doors leaving hundreds of unfinished developments across the country, along with Spanish property company Cosmani Inmobiliaria which came out and announced in April that five businesses out of its group of 22 companies have also filed for administration.

Back in April, Grupo Sanchez applied to courts in Barcelona for a ‘concurso voluntario’, and commercial and marketing director Charles Garcia, told OPP: “In Spain it is very tough at the moment and many developers are facing liquidity problems. A newspaper report said recently that of the €16bn in developer debt currently being re-negotiated in Spain, Colonial, Habitat and Martinsa-Fadesa are re-negotiating €13bn worth of it. Our amount is small in comparison.”

Fall in profits
Spanish house builder Realia posted a 36% fall in net profit for Q1 2008, while its parent company, developer and services group Fomento de Construcciones y Contratas SA (FCC) posted near similar losses of 35.8% during the same time period. According to Reuters, results from FCC's peers also showed the effect of the construction slowdown in Spain.

Developer Ferrovial said last week that domestic construction revenues had fallen 14% in Q1 2008 and sales at builder Sacyr's property arm Vallehermoso fell 26%.

Meanwhile, unlisted Spanish builder SEOP, which suspended debt payments in March, revealed it was proposing to creditors that they forgive one third of its €267.2m in ordinary debt and that it pay the rest over three years.

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