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Spain s Colonial posts 2.38 billion euro loss

MADRID, September 1 – Spanish property group Colonial, struggling under huge debts, announced losses of 2.38 billion euros for the first half of 2008 which it blamed on asset depreciation.

Colonial said in an announcement late Sunday that it had reached an agreement in principle to reschedule its debt of nearly nine billion euros this month.

The firm did not say whether the agreement includes the planned sale of its shares in France\’s Societe Fonciere Lyonnaise (SFL), estimated to be worth more than four billion euros (5.8 billion dollars), or Spanish construction group FCC.

Like other Spanish property firms, Colonial has been hurt by rising interest rates and the global credit crunch. The Spanish market has been one of the worst hit in Europe.

Colonial said it had alloted 2.51 billion euros in the first half to write down its assets and the value of its 15 percent stake in FCC.

It said it had an operating profit of 129 million euros for the first six months and valued its property portfolio at 10.5 billion euros as of June 30.

Spanish property developer Martinsa-Fadesa filed for bankruptcy in July, the first major victim of Spain\’s housing market crisis, prompting warnings that further failures could lie ahead.

Low interest rates that followed Spain\’s accession to the eurozone in 1999 fuelled a housing boom as Spaniards took out mortgages to buy homes for the first time or to trade up to a larger house.

The market began to suffer early last year as rising interest rates and the international lending crunch brought the expansion to a halt, making it hard to sell property in a market that many argue is oversupplied.

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