Spanish holiday-home developer Polaris World has narrowly avoided bankruptcy proceedings after reaching an agreement with its creditors at the eleventh hour

Murcia-based Polaris World, the biggest holiday home developer in Spain, last night reached a deal with its banking creditors just before a deadline that would have forced the company to seek court protection from its creditors. The sticking point that held up an agreement was how the value Polaris World’s assets in Murcia such as land.

After 4 months of teetering on the brink of bankruptcy, PW convinced 4 of its lenders – CAM, Bancaja, Banco Popular and Banco de Valencia – to buy finished homes, golf courses, land, and hotels, in return for 83 million Euros, giving the developer a much needed shot of liquidity that it hopes will tide it over until the market picks up.

The Spanish press reports that signs of economic recovery in the UK and Germany suggest that a recovery in holiday home sales will not be far behind.

This is the second time in less than a year that Polaris World has avoided bankruptcy proceedings. Las autumn it negotiated a 900 million Euros debt-for-land exchange with its banking creditors. As a result its creditors now have to work out what to do with 6 million square metres of land in Alhama, Murcia.

PW was founded in 2001 by local builders Pedro García Meroño and Facundo Armero. Armero sold out to Credit Suisse in 2006 for 500 million Euros. Meroño is now the largest shareholder, and José Luis Hernández is the company president.

PW has 7 golf developments in Murcia: Mar Menor Golf Resort, La Torre Golf Resort, El Valle Golf Resort, Hacienda Riquelme, Condado de Alhama, La Loma Golf Resort and Las Terrazas. At the top of the boom its turnover was more than 800 million Euros, with more than 2,000 employees (now down to 700 or less).

Setting aside the clients and contractors suffering as a result of the company’s financial problems, the big losers in this drama are the banks and cajas who lent the company money. All told they have agreed to swap more than a billion Euros of debt in return for assets of dubious value such as land in the Murcian back of beyond.