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Spanish developer popular with foreign property investor faces administration

The company, which has promotions in regions like Andalucia, Catalonia and Valencia which are particularly sought after by UK buyers, has to now prove that it is not insolvent and that it can pay its debts or face potential bankruptcy.

A court in Madrid has accepted a request from one of the company's creditors, Avalatransa, to start administration proceedings, a step in Spanish commercial law that can lead to administration and bankruptcy.

The judge said that documents produced by Avalatransa show there is evidence of possible insolvency at Nozar. It is the second time that Avalatransa has tried to force Nozar into administration for not paying its debts. A previous request, in March last year, was rejected by the courts.

Nozar developments include El Mirador del Mediterráneo which has 180 apartments with sea views in Benidorm, and 500 flats and penthouses close to the beach in Alicante.

Nozar, controlled by the Nozaleda family, is reported to have debts of around 4 billion Euros, which would make it the second largest bankruptcy in Spanish history, after fellow developer Martinsa-Fadesa if it cannot pay its debts.

Meanwhile the Martinsa-Fadesa bankruptcy proceedings, affecting hundreds of foreign buyers, are likely to take a year longer than expected. The administration court dealing with the claims of Martinsa-Fadesa's creditors has received 630 claims to date, with more expected despite the January 14 deadline.

The high number of claims, which all have to be dealt with individually, mean that it may take a year longer than expected for the proceedings to be wrapped up.

This means yet more frustration for Martinsa-Fadesa's clients who have nothing to show for their staged payments, or who have purchased on developments that have not been finished by the developer.