Spain: Developer seeks protection from creditors

MADRID — The crash in Spain's real estate market claimed another big victim Friday as Promociones Habitat, a major developer, filed for protection from creditors holding euro2.3 billion ($3 billion) in debt.

The Barcelona-based company said it continues to operate as usual and will try to finish the projects it has under way, but has no choice but to seek court protection as it tries to restructure its debt load.

"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 Bruno Figueras said in a statement. He did not specify which assets he meant.

It was the second-largest bankruptcy filing stemming from the Spanish real estate crash, after Martinsa-Fadesa's in July. That company is one of Spain's largest developers but yielded under a crushing debt load of euro5 billion euros.

There has been a steady trickle of such filings by firms of all sizes since the crisis started taking its toll in late 2007, as companies facing dwindling sales and colossal debt turned to the courts for relief.

Up until a few years ago, Spanish developers and builders were making money in a go-go debt-fueled market that saw housing prices soar.

But housing sales have plummeted due to higher interest rates on mortgages and much tighter lending conditions from banks that were spooked, albeit not directly hit, by the subprime mortgage crisis in the United States.

The housing malaise has taken a severe toll on the Spanish economy because in recent years the construction sector and related industries accounted for up to 18 percent of Spanish gross domestic product.

The Spanish economy grew 3.8 percent in 2008 but shrank 0.2 percent in the third quarter of this year, the first such decline in 15 years. The Organization for Economic Cooperation and Development forecasts it will contract 0.9 percent in 2009.