Spain is facing the next mega bankruptcy

The crisis on the Spanish real estate market has torn another company into the abyss: The highly indebted real estate company Reyal Urbis has filed for bankruptcy. It could be the second largest bankruptcy in Spain’s economic history.

It has now been around five years since the huge real estate bubble in Spain burst – and there are still huge shock waves: just over six months ago Spain applied for billions in aid loans for its banks from the EU, now one of the remaining real estate marketers is breaking together with a great din. Reyal Urbis owes more than three and a half billion euros. The assets are a little more than four billion euros.

The creditors of Reyal Urbis are mainly the major Spanish bank Santander and the partially nationalized Bankia – more precisely: the outsourced Bad Bank. In addition, there are not inconsiderable tax liabilities to the Spanish state.

Everything stands still

In order to be able to settle at least part of this tax liability, Reyal had asked the banks for a comparatively ridiculous new line of 30 million, but they refused – that was probably equivalent to reaching for the wrecking ball. The management stated that the company was insolvent and would file for voluntary bankruptcy. "All activities of the company come to a standstill, including all ongoing construction projects," says real estate expert Mikel Echavarren, explaining the immediate consequences. "No more apartments are sold, no keys to finished apartments are handed over. And the suppliers and craftsmen have to wait."

Reyal Urbis has been struggling with growing debts for years. On the one hand, because many properties have lost tremendous value after the real estate bubble burst. On the other hand, because new apartments do not achieve the originally planned revenues or are completely unsaleable. Reyal has not built any new apartments since the first debt restructuring three years ago, but the company is still sitting on 780 completed residential units that cannot be bought.

The negotiations on a further restructuring of the debt, which had been going on since last year, have now apparently failed. This threatens the second largest bankruptcy in Spanish economic history. Four and a half years ago, the real estate group Martinsa-Fadesa had agreed with the creditors on a ten-year period for the repayment of its debts, at that time it was more than seven billion euros.

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