SPAIN - Nozar, a major property company in Spain, is on the brink of going into administration with debts of over €4bn, which could make it the second- largest corporate default in the country.
Avaltransa, one of Nozar's creditors, asked a judge in Madrid last week to put the privately-held firm into administration for a third time, after two requests made last year were rejected by the Spanish courts.
Nozar is under the control of the Nozaleda family and has five days to respond to the court action, after which the company will be declared bankrupt.
Spanish property firm Martinsa-Fadesa went into administration last year with €5.1bn of debt, making it Spain's largest commercial default, while Promociones Habitat went into administration with €2.3bn of debts.
A spokesperson for the Nozaleda family said they planned to defend Nozar's financial situation.
Commenting on the situation, Roger Cooke, managing director for Cushman & Wakefield in Spain, said: "Nozar is one of many, many Spanish property companies who are struggling or who have failed already.
"A lot of them are being supported by their banks in their financings, particularly the bigger ones, but they are muddling through and finding a way to keep going almost from one day to the next," he added.
Colonial and Metrovacesa are examples of Spanish property firms being supported by their banks to prevent them going into administration, he continued.
"Banks are taking control of assets to reduce debt, cancel mortgages and credit lines. They are taking assets back, but there is a stagnation problem for these companies. They have assets they can't sell or can't sell at sensible prices," said Cooke.
The Spanish residential sector is one of the worst sectors being affected by a lack of demand and a shortage of cash flows. The commercial sectors have also felt the strain of large yield adjustments and a lack of financing for transactions.
Commenting on what needs to be done to help failing property companies, Cooke said: "There is an uncertainty about the economy and occupational trends, which means a lot of people are taking an attitude of ‘wait and see'. We've got to get confidence, not just in the real estate market but confidence back into the economy generally for people to go out and buy again."
Pedro María Gómez, the judge concerned, admitted Avaltransa had brought documents outlining the extent of property firm's debt and said it was up to Nozar to provide evidence that it is in a position to avoid bankruptcy.
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