Martinsa Fadesa: the largest bankruptcy in Spanish history

Martinsa-Fadesa, a large real estate company in Spain has gone to the wall. As is usual, bankruptcy came in the form of a liquidity crisis, not as a technical bankruptcy. Below is a report from El País in Spain, followed by a report from Bloomberg from before the company filed for protection from its creditors.

This situation has been building for days with the stock price of Martinsa coming under heavy selling pressure the past week. Shares were suspended before the announcement. Martinsa-Fadesa’s bankruptcy should wake people up to the credit writedowns to come in Spain.

I have now seen this in the English-language press only at Bloomberg.

(updates to follow)

This from El País in Spain:

My translation

From the happiness of being president of Real Madrid to being the major player to the largest bankruptcy in Spanish economic history. The company Martinsa-Fadesa, headed by Fernando Martin, tonight became the first major victim of the mortgage crisis in Spain. The company has a workforce of 880 employees, whose future is unknown.

In a communique, the Governing Body of Martins-Fadesa Inmobiliaria, which has been meeting in Madrid since this afternoon, decided to instigate a voluntary bankruptcy (formerly known as a suspension of payments) “whose ultimate goal is to ensure the continuity of [the company’s] business plan, leading to a turnaround and reorganization of the company by way of the Insolvency Act,” the administrative body declared.

This is the biggest default in history with liabilities of 5,200 million euros. Martinsa-Fadesa Inmobiliaria, the largest Spanish real estate company by assets, has been unable to fulfill the commitments to which it agreed with its creditor banks.

“This decision is being adopted because of serious cash-flow difficulties created by not having obtained 150 million euros credit that the company needed to acquire liquidity and further develop its projects in the normal course of business. The Governing Board of Martinsa-Fadesa Inmobiliaria initiated a voluntary bankruptcy as soon as it was obvious that [securing] the credit was impossible, in order to avoid any future damage to its creditors or suppliers,” added the note by Martinsa.


De la felicidad por ser presidente del Real Madrid a protagonista del mayor concurso de acreedores (antigua suspensión de pagos) de la historia económica española. La empresa Martinsa-Fadesa, presidida por Fernando Martín, se ha convertido esta noche en la primera gran víctima de la crisis hipotecaria en España. Esta empresa tiene una plantilla de 880 trabajadores, cuyo futuro se desconoce.

En un comunicado el Consejo de Administración de Martinsa-Fadesa, reunido en Madrid desde esta tarde, ha decidido instar a un concurso voluntario de acreedores (la antigua suspensión de pagos) “cuyo objetivo último es garantizar la continuidad de su proyecto empresarial, procediendo al saneamiento y reorganización de la compañía a través de los instrumentos de la Ley Concursal”, ha aclarado el órgano de administración.

Se trata de la mayor suspensión de pagos de la historia con un pasivo de 5.200 millones de euros. Martinsa-Fadesa, la mayor inmobiliaria española por activos, no ha podido cumplir con los compromisos a los que llegó con los bancos acreedores.

“Esta decisión se adopta ante la constatación de las graves dificultades de tesorería que genera la no obtención del crédito de 150 millones de euros que la compañía precisaba para dotarse de liquidez y seguir desarrollando sus proyectos con normalidad. El Consejo de Administración de Martinsa-Fadesa ha instado el Concurso Voluntario tan pronto como ha tenido certeza de la imposibilidad de dicho crédito, para evitar así cualquier perjuicio futuro a sus acreedores o proveedores”, añade la nota de Martinsa.
El Pais, 14 Jul 2008

Update: From Bloomberg:

Martinsa-Fadesa SA became the first publicly traded Spanish developer to seek protection from creditors since a decade-long real estate boom ended last year.

Martinsa sought bankruptcy protection after failing to secure a loan that banks had demanded as part of a debt refinancing, the Madrid-based company said today in a statement. Martinsa has a market value of 680 million euros ($1.1 billion), less than half of a peak reached in March.

A slump in Spanish home sales, combined with rising borrowing costs, has made it harder for property companies to pay their debts. Sixty-five developers and real-estate brokers based in Spain have sought bankruptcy protection this year, according to Credito y Caucion, a Spanish credit insurer.

“This decision has been taken due to the grave cash-flow difficulties created by the inability to obtain a 150 million euro loan which the company needed for liquidity and to continue normal development of its projects,” the company said in an e-mailed statement after a emergency board meeting in Madrid.

Trading in Martinsa shares was suspended earlier today in Madrid. Before the suspension, the shares fell as much as 29 percent to the lowest ever. Spain’s five largest developers have lost 6 billion euros in market value this year.

The company has 5.2 billion euros of debt. Its assets, which include houses, holiday resorts, golf courses and shopping malls, are valued at 9.7 billion euros, down from 13 billion in June last year, according to regulatory filings.

`Contagion Effect’

“There are going to be more companies of this size and type seeking protection in the future,” Paval Gomez del Castillo, a spokesman for Credito y Caucion, said by telephone before Martinsa made its announcement. “The contagion effect on other developers is going to be notable.”

Martinsa-Fadesa was created by the 4-billion-euro acquisition of Fadesa Inmobiliaria SA by Grupo Martinsa last year. Chairman Fernando Martin is the largest shareholder, with a stake of 60 percent.

Martin and the company’s management will retain their posts during the bankruptcy proceedings, the statement said.
Bloomberg, 14 Jul 2008

Martinsa-Fadesa anuncia la mayor suspensión de pagos de la historia en España, El Pais, 14 Jul 2008
Martinsa Seeks Bankruptcy Protection After Failing to Get Loan, Bloomberg, 14 Jul 2008

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