Spain's property market crash claimed another victim on Tuesday, as property company Reyal Urbis filed for insolvency after failing to renegotiate debt with its creditors.
The move takes the property developer, which had €3.6 billion of debt at the end of September, closer to becoming Spain's second-largest bankruptcy after Martinsa Fadesa, which defaulted on €7bn of debt in 2008.
Dozens of property companies have collapsed in Spain, where house prices have fallen around 40 per cent since their 2007 peak. With the country locked in a deep recession, analysts expect prices to fall further still.
Spain's banks were crippled by the property market bust, eventually requiring the state to agree a European bailout for its lenders of almost €40bn last year. Indebted property firms have asked banks for debt relief but patience is wearing thin among lenders saddled with soured property assets.
Reyal Urbis is 70 per cent owned by construction magnate Rafael Santamaria and its creditors include Santander, BBVA, Bankia and Banco Popular.
The company, which valued its property portfolio at €4.2bn in June 2012, said it would continue to operate as permitted by Spanish insolvency laws.
Its insolvency petition now goes to court and its fate will be in the hands of a judge.
Reyal Urbis said Santamaria would remain at the helm of the company and he still hoped Reyal Urbis could reach a deal with its creditors, given "the good will of all negotiating parties".
The company had until February 23 to reach a debt restructuring deal with the banks or file for insolvency. Sources close to the matter told Reuters on Friday that creditors had rejected the company's €3.6bn proposal.