Another Spanish property victim?

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 three days ago.

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.

At the current moment Colonial’s foreign creditors have agreed to refinance 6.1 billion euros ($8.86 billion) of debt, but the Spanish developer is still talking to domestic banks over a further 1.48 billion of loans.

Market watchers are speculating whether Colonial will be Spain’s next property casualty, going the way of the sector’s biggest firm Martinsa Fadesa, which went into administration in July.

The latest agreement gives Colonial some breathing space as the credit crunch raises financial costs and cuts credit while it faces shrinking asset values and a drop-off in sales at the end of Spain’s decade-long property boom.

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