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More bad news from Spanish property developers

Barcelona-based Promociones Habitat, Spain's fifth largest developer, is the latest to seek protection from its creditors by filing for administration with debts of around €2.3 billion. The company, run by Bruno Figueras, first got into problems in February but it managed to re-schedule its debts with new repayment terms from foreign lenders. But now it has failed to meet the new terms and cannot refinance.

A company statement said that it hopes to be able to continue with the business and complete projects that are underway. But with the Spanish property market suffering a severe downturn, industry professionals do not see how it can survive the administration process.

'Habitat is an entirely viable company which has been hit hard by the current financial and real estate crisis, but which has high-value assets that sustain it and give it solidity,' the company's chairman Figueras said. He did not specify which assets he meant.

It is the second-largest bankruptcy filing stemming from the Spanish real estate crash, after Martinsa-Fadesa's in July.

More bad news is expected in the coming weeks. Colonial, another of Spain's largest developers has stated that it may be forced to seek the protection of administration if it fails to sell some of its large stock holdings.

The firm agreed in September, as part of a restructuring of debts of around €7 billion, to sell its 33% stake in French property group SFL, 15.4% in Spanish builder FCC and all or part of its commercial real estate subsidiary Riofisa.

There is not much sympathy for the troubled developers. 'We are all aware that we experienced a period of bonanza, I would say almost of excess, in the construction sector and now we are in a period of a return to normality,' said Economy Minister Pedro Solbes.

'Companies had made a bet, not in bad faith, that things would continue to go in the same direction and they took more risks, financial ones as well, and logically situations like these can arise,' he added.