Spanish Mortgage News

PROPERTY NEWS

Courts accept to proceed with the insolvency situation of Polaris

The group now has three months to renegotiate a debt of close to 100 million euros with the banks and savings banks in order to regain liquidity.

The judge for Mercantile Court Nº 2 in Murcia today issued an edict in which he agrees to accept as received a communication from Polaris World regarding "its current state of insolvency". The court therefore states its awareness of the "start of negotiations to obtain acceptance of an expected agreement proposal" from the companies El Valle Golf Resort S.L., Polaris World Sports Centre S.L., Polaris Desarrollo S.L., Hacienda Riquelme S.L., Polaris World Development S.L., Polaris World Alquiler De Maquinaria Industrial S.L., Polaris World Hormigones S.L, Polaris World Real Estate S.L., Hacienda Verde S.L., Nicklaus Golf Trail S.L., Mar Menor Golf Hotel S.L., La Torre Polaris Hotel S.L., Centro Comercial El Oasis de Alhama S.L., Oasis Polaris Ciudad S.L. and Alhama Golf Resort S.L.; the companies that comprise the group.

The edict goes on to say, "following expiry of a three-month period to be counted from 22 December 2009", the date of said communication to the court, "the debtor shall be required to file for bankruptcy during the following month, whether or not the necessary acceptance has been obtained to proceed with the expected agreement proposal". However, any agreements that are reached would return solvency to the group and, therefore, would remove the need to continue with bankruptcy proceedings. In short, the group has three months from now to renegotiate a debt of close to 100 million euros with banks and savings banks in order to regain liquidity.

The edict concludes, "any bankruptcy requests filed by the creditors following the date of said communication will only be accepted once the one-month period provided for in said Section 5.3 of the Bankruptcy Act has passed if the debtor has not already filed a bankruptcy application. I f the debtor files for bankruptcy within said period, this will be processed first, in accordance with Section 14. Once bankruptcy is declared, those requests filed previously and those that are filed subsequently shall be added to the edicts and the applicants shall be accepted as party to the case.

Polaris looks for breathing space to avoid bankruptcy proceedings

The flagship of residential tourism has three months to renegotiate a debt of less than 100 million euros

The collapse of the real estate market and the failure to reduce its debts with banks and savings banks has set the Murcian developer Polaris World down the road to bankruptcy, a situation that the company will try to resolve over the course of the next three months. The pre-bankruptcy situation, formally accepted on 22nd December last through a communication to the High Court of Justice (TSJ), is a result of the residential tourism flagship company's lack of liquidity. This step has caused concern among economical, social and political circles in the Region of Murcia because it may well bring down other suppliers and contractors if the worst case scenario becomes a reality.

Experts indicate that, under the protection of legal proceedings, Polaris has chosen a strategy to turn up the pressure on its creditors in search of an agreement and, above all, to avoid any of these creditors forcing bankruptcy.

Yielding assets

Besides the banks and savings banks, Polaris must also respond to other creditors. If an agreement is reached with the credit entities, the communication issued to the courts would be archived and no bankruptcy proceedings would take place. The company has chosen a formula to protect itself and earn some time

During the summer, the developer made attempts to reduce its debt to zero and face the crisis from a better financial standpoint. Talks took place with this group of banks regarding the option to yield a part of the company's assets, which included the land assets owned by the company and a portion of its real estate properties. The group would retain ownership of the resorts, golf courses, hotels and restaurants. Polaris wanted to thus reduce its financial costs because of a drastic fall in revenue.

The company claims to own vast assets

It claims that many companies in the Region of Murcia are in the same situation with the courts due to the current crisis

Alhama sees a 300 million fall in revenue

The Condado de Alhama resort is the largest in volume. Work was stopped at the end of 2005 by a vote against it from a councillor in the PP party and the socialist group. It resumed two years later but lost the market momentum. It is the largest complex in Europe, with 12,500 properties.

Bank Forclosures:A time-bomb in the property sector

According to experts, the avalanche of bank foreclosures and the public auction of thousands of properties expected in 2010 may accelerate the falling price of residential property and have an extremely damaging effect on the real estate market

Due to the overloaded court system, those cases of bank foreclosure opened at the end of 2008 and start of 2009 had not been fully processed until recently with the auction sale of the property in question. Those cases that were opened in mid-2009 will not be closed until the start or middle of 2010

Dilemma for the banks:

If the banks choose to sell the property whatever the cost, the asset would indeed be removed from the balance sheet but with a significant capital loss in the majority of cases.

The second alternative for the banking sector is not to sell the asset and keep hold of it indefinitely in the hope of a future recovery in the housing market and a consequent rise in prices. The problem is that, according to new regulations from the Banco de España, banks are obliged to annually cover 20% of the accountable value of the asset from the first year that it enters the balance sheet. The longer it takes to sell the property, more provisions and more bank resources will be consumed. A difficult choice.

Could this situation accelerate the price adjustment that the experts believe necessary? 2010 will bring the answer.

LEGAL NEWS

Express eviction' for problem tenants who fail to pay their rent

The imminent legal reform that will shorten the eviction period seeks to stimulate the property rental market - Tenants lose certain guarantees - The current court system overload may limit effectiveness

The main changes:

- To court for owing one month's rent. Property owners may press for eviction when the tenant owes just one month's rent. Up until now, it was necessary for the tenant to owe two months. If the action is rendered ineffective (the legal terminology for paying the debt), the tenant may remain in the property but will be evicted upon failing to pay the rent once more

- Eviction demand and claim for forced eviction. If the eviction demand is accompanied by a claim for forced eviction, the judge will agree to the same in his ruling. Therefore, the property owner will no longer need to wait 20 working days to request execution of the ruling.

- Rulings in six days. The reform obliges the judge to pass a ruling within this period and, when the parties are called to court, this will also be done so the ruling can be passed within the same period.

- Edict. The tenant will be formally called to appear in court with an edict in the event that they are not present in the property when visited by the notifying officer. No attempts will be made to locate them through other channels, as is the case now.

- Option to reach an agreement. The property owner has the option in the demand to excuse all or part of the debt owed by the tenant if said tenant leaves the property within the period set by the owner, which may not be less than 15 days

Uninsured foreign cars = State responsibility

The State must pay 194,000 euros to the driver of a car who was seriously injured during a traffic accident on 18 February 2001 in Cieza (Murcia) for not having detected, as it entered Spain, that the Lithuanian car that caused the accident and whose driver died during the collision lacked the compulsory insurance cover.

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