Spanish property developer Martinsa-Fadesa has declared itself insolvent, having failed to raise a loan as part of a €4 billion refinancing package.

After a board meeting late Monday, the Madrid-listed company made a request to be declared in breach of payments, after it was unable to secure the €150 million loan.

The company said the move would prevent its financial crisis from becoming “irreversible and having grave repercussions on creditors and the interests of all shareholders".

It is the first large property group in Spain to seek protection from its creditors since the bubble burst on Spain’s once-booming real estate market last year.

Despite the woes in its home mortgage market, Spanish bank Santander yesterday launched a £1.3 billion takeover bid for Alliance & Leicester that will make it the UK's biggest mortgage lender when A&L is combined with Abbey.

The low interest rates that followed Spain’s accession to the eurozone in 1999 fuelled its housing boom as Spaniards took out mortgages to buy homes for the first time or to trade up to larger houses.

The market began to suffer early last year as rising interest rates and the international lending crunch hit Spain’s credit-fuelled expansion, making it hard to sell property in a market that many argue is oversupplied.

Martinsa-Fadesa has assets that were estimated to be worth €10.8 billion, and it employs 880 staff. Spanish press reports said the group was considering cutting its workforce.

Trading in shares in the group was suspended yesterday. Before that, shares crashed by 24 per cent to €7.3, having fallen by nearly half since Friday.

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