I have received the following newspaper article from the La Torre residents website.
The final paragraph is the most significant to our hopes, so I am placing it here with the full text below. I can't say I feel qualified to comment but the following comment from the bank appears to be a hopeful sign.
The strong message coming from the banks is that no-one can afford to see Polaris go down. The vice president of the Cambank said yesterday, "Polaris is a leading flagship in the region. I believe that we have to give a margin of confidence for the good of all."
He also added that the bank had reached agreement with the constructor before, and was confident that the same thing could happen again.
The full article is as follows:
Following Mondays shock announcement that Polaris World has sought judicial protection from creditors, more details have emerged about the attempts of the company to re-finance and avoid the current situation.
It transpires that most of the existing debt has been incurred since the autumn, with sluggish sales exacerbating the situation.
The current debts of around 100,000,000 euros have been generated by ongoing expenses, operating costs, and money owed to ancillary suppliers and contractors, as well as debts owed to local municipalities which have now become due.
The two municipalities who are most affected by the financial problems of the construction giant are Torre Pacheco, which houses several of the major established developments and Alhama de Murcia which is home to the new Condado de Alhama.
Monies due to be paid to the two municipalities this coming year total 17 million euros, excluding 8 million which was paid earlier this month, part of which was a hefty interest charge for late payment of the monies owed.
A further 9 million euros is due to be paid to Alhama council at the end of this month, although Alhama councillor for urbanism, Jose Espadas, was at pains yesterday to assure residents of the municipality that the council has sufficient bank guarantees in place to ensure that residents will not be adversely affected by the financial situation of the developer.
He explained that as the urbanization has residents occupying many of the 3000 homes that have already been constructed, the municipality has responsibilities for the maintenance of transport infrastructure and public services, which they are now legally bound to maintain.
Although only 3000 of the planned 30,000 have actually been constructed, commitments have been made to infrastructure construction and payment still has to be made for the cost of the new roads built and costs incurred.
Polaris World admitted yesterday that their employees and creditors had been advised that the company was seeking judicial protection before the news was made public , although one or two pointed comments in the press were made about the date of the judicial declaration .
The declaration was lodged on 22nd December, a day that the eyes of the country were focused on the El Gordo lottery draw, giving the company a few days breathing space before the news leaked that the company were in deep financial trouble.
The news came out on Monday, on the same day that representatives from the company were meeting with the banks in Valencia, to try and maintain the liquidity of Polaris World.
15 of the operating companies within the umbrella group of Polaris are known to be on the list of insolvent operations.
The company has been struggling for several months, sales and the value of sales struggling as the economic crisis continues and the property market wallows in the muds of its own making.
The truth is that Spain has just built too many houses and allowed construction to create a situation of excelled economic growth which is now fuelling the economic disaster facing the country in 2010.
Real growth in Spain was running at nearly double that of the rest of Europe before the recession struck, driven by construction, building 750,000 new homes in 2006 alone, more than the rest of Europe put together!
Rising house prices worldwide made construction an incredibly lucrative profession, and prices rose in Spain as buyers flocked to snap up off-plan developments with the lure of excellent profits, and who could blame them, prices between 1997 and 2007 rose by over 200%.
The massive problems with the American market, however, converted a small rolling ball of snow into an avalanche, and many developers have been caught out by the sudden drop-off in purchasing, exacerbated by the horror stories which have surfaced in recent months about the people who have lost vast amounts of money on Spanish constructions, and the lack of credit availability.
The buyers have stopped buying.
And now over a million properties lie empty and unsold, experts estimating that it will take several years to unblock the glut.
The solution for many cash strapped developers has been to surrender their properties to the banks in lieu of debts.
At the beginning of November banks were estimated to be holding 36 billion euros worth of surrendered property assets.
This is the route adopted by Polaris back in October when their indebtedness to the banks reached a staggering 1000 million euros.
At the beginning of October, when planning approval was received for the second phase of the Condado de Alhama, the company sought to eliminate the burden of debt by coming to an arrangement with the banks to exchange ownership of vast numbers of properties to pay off their debts, which means that many properties now for sale on the urbanizations are owned by the banks, not Polaris.
The company still continues to market the properties via its' network of agencies and run the developments.
Bancaja and Caja Mediterraneo are the two banks with the greatest holdings in Polaris World, and although they are unwilling to divulge their holdings, they are certainly the owners of more than 1000 Polaris World properties.
Polaris now wish to come to another arrangement which will give them liquidity to pay off their debts and allow them to continue with existing projects, although for the banks the risk is growing daily.
Adverse publicity in the British Press about some of the experiences of those who have been caught in the property downturn has lead to a confidence crisis. The property rentals market at the moment is booming, as buyers sit on their wallets and wait for the bargains to come along.
Banks in the north of Spain have been offloading properties at discount prices to reduce their indebtedness, the buyers snapping up top value properties at low prices.
Recent economic reports indicate that Spain needs to reduce its' prices by 20% to recover economically from the current crisis, so now is not the best time to be sitting on 36 billion euros worth of property if you need ready cash, so banks have to be careful that they do not burden themselves with too heavy a burden of unsaleable properties.
Saying that, if someone owes you 1000 euros it's not such a big problem. But if someone owes you 100 million euros you have to be flexible.
Estate agents report that good value , top of the range , and properties on established urbanizations are still selling well, but there is a static glut of lower quality properties.
The strong message coming from the banks is that no-one can afford to see Polaris go down. The vice president of the Cambank said yesterday, "Polaris is a leading flagship in the region. I believe that we have to give a margin of confidence for the good of all."
He also added that the bank had reached agreement with the constructor before, and was confident that the same thing could happen again.
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