Troubled Spanish property group denies cash crisis

Spanish property developer Inmobiliaria Colonial insisted Wednesday its business was progressing normally after the stock market regulator suspended trading in its shares following sharp losses last week.

Shares in Colonial, saddled with debt put at 8.9 billion euros (13.1 billion dollars) at the end of September, lost 25.4 percent of their value on Friday after a drop of 16 percent on Thursday amid speculation it was facing problems.

On Friday, company chairman Luis Portillo stepped down, along with several other board members, and earlier this week it announced the sale of land and buildings worth some 308 million euro (451 million dollars) to Spanish groups.

"The company has reached its targets for 2007 and accordingly it is pursuing its projects without any need to take extraordinary measures," Colonial said in a statement issued through the bourse authorities.

The sales on Monday and Tuesday "were part of the normal management of its assets," Colonial said.

Analysts said the disposals were needed to give the company much-needed cash.

Colonial also said Wednesday it would sell down its more than 84 percent stake in French unit SFL to below 60 percent in order to meet local ownership regulations.

It had taken no decision on its 15 percent holding in infrastructure group FCC, it added.

"Revenue from its core rental business is insufficient to cover debt interest and the company needs to make disposals... in what is not a sellers' market," said an analyst at a leading Spanish bank, who asked not to be named.

A sale of the FCC stake risked being taken by the market as a sign of desperation, given that shares in the infrastructure group are trading substantially lower than the price Colonial paid for them in 2006.

"Colonial acquired Acciona SA's 15-percent stake in FCC in 2006 for 1.35 billion euros. Current market prices value this stake at 1 billion euros," analysts at BPI bank said.

Colonial is a symbol of the boom in the Spanish property market over the past few years. It owns mainly commercial property estimated at 13 billion euros.

The company was built up aggressively by Portillo, who was the head of small property group Inmocaral which launched a takeover bid for established real estate company Colonial in 2006.

At the time, Inmocaral had sales 178 times smaller than Colonial.

Colonial's debt is now estimated to cover about 66 percent of its assets.

Earlier Wednesday, the Expansion daily said the company was trying to generate liquidity and the board had considered a sale of Portillo's near 41 percent stake to new investors ready to put up fresh funds.

In April, the financial problems of minor property group Astroc caused a sharp fall in the value of all Spanish real estate groups.

Analysts have frequently warned that the Spanish property market is overheated and that a sharp fall in house prices is a risk.

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