Trading in Fadesa’s shares have been suspended this morning after falling 27% in the first hour of trading on the Madrid stock exchange. Martinsa-Fadesa’s shares have now fallen by more than 50% in 2 days, and the regulator of Madrid’s stock exchange has not said when trading in Fadesa’s shares will resume.

Fadesa is struggling to renegotiate more than 4 billion Euros of loans with a consortium of banks. The collapse in Fadesa’s share price came on the news that Fadesa had failed to obtain a 150 million Euro loan from Spain’s Institute of Official Credit (ICO). Securing this loan was a key condition imposed by Fadesa’s bank creditors for refinancing its debt.

The fact that Fadesa’s shares have been suspended make it more likely that the company will be forced to seek voluntary protection from its creditors. Fadesa’s board will meet in an emergency session this afternoon to decide what to do.

If Martinsa-Fadesa is forced into administration, it is likely to shake already low investor confidence in the Spanish property sector.

The process of voluntary protection from creditors, known in Spain as ‘concurso volutario de acreedores’, does not necessarily spell disaster for Fadesa’s buyers, many of whom are British. Companies can continue trading in administration, and some survive the process more or less intact.

Martinsa-Fadesa has a sales office in London where it sells projects such as Costa Esuri in the ‘Spanish Algarve’ (Costa de la Luz) and Mediterrania-Saïdia in Morocco.