Some of Spain’s most prominent law firms may now be being asked to take sides in the multi-billion insolvency of Martinsa-Fadesa, one of Spain’s leading property groups.

Martinsa-Fadesa has declared itself insolvent with debts of more than €5.2bn after having failed to agree a €150m package to refinance its debt obligations. A team from Gómez-Acebo & Pombo (GAP), led by María José Paz-Ares on the litigation side and Ángel Varela on financial issues, is now advising the company - an established client.

Martinsa-Fadesa, along with a number of its subsidiaries, has filed proceedings in the Court of Commerce of La Coruña. The company has assets estimated to be worth €10.8bn and employs 880 people, however among its major creditors are Caja Madrid, La Caixa, Banco Popular and Caixa Cataluna, which between them are reportedly owed almost €2.5bn. 

Martinsa-Fadesa was created last year through the €4bn debt-financed acquisition of Fadesa (advised by Linklaters) by Martinsa (advised by GAP).

This is the first major insolvency of a publicly-listed company in Spain, and the largest insolvency to date. The company’s failure comes as real estate sales and values continue to fall, along with the hardening of loan terms among the major finance banks.

Experts suggest that the fall-out from Martinsa-Fadesa’s insolvency may have a significant effect also on the company’s suppliers, while further high profile collapses cannot now be counted out. More than half of the companies filing for bankruptcy in the first quarter of 2008 have their core business in the construction and real estate sectors.