Colonial to meet creditor banks

The firm owns property in Madrid and Barcelona

Debt-hit Colonial, Spain's second biggest property group, had its shares briefly suspended in trading in Madrid, amid reports it was meeting creditors.

A property boom has driven the country's economy for more than a decade, but builder SEOP and developer Cosmani declared insolvency last month.

The creditor banks may convert debt into shares in the firm, which owed 8.9bn euros ($14bn;£7bn) as 2007 ended.

Colonial owns offices and malls in Madrid, Barcelona and Paris.

Savings bank La Caixa has said it is ready to convert its debt into Colonial shares if all parties concerned agree on the plan.

Meanwhile, Banco Popular has said it has not decided what to do.

Boom over?

In January, Colonial lost 40% of its value in two days and more than half of its board members resigned, first raising the spectre of a property meltdown in Spain.

Its shares rose by 6.52% to 0.98 euros after trading was resumed at midday.

Spanish property firms have been hit by rising interest rates and the global credit crunch.

That has made it hard to sell property in a market that some believe may be over-supplied. In January, home sales in Spain fell 27% on the previous year, while the number of new home building permits dropped by 50.2%.