July 14 (Bloomberg) -- Martinsa-Fadesa SA became the first publicly traded Spanish developer to seek protection from creditors since a decade-long real estate boom ended last year.

Martinsa sought bankruptcy protection after failing to secure a loan that banks had demanded as part of a debt refinancing, the Madrid-based company said today in a statement. Martinsa has a market value of 680 million euros ($1.1 billion), less than half of a peak reached in March.

A slump in Spanish home sales, combined with rising borrowing costs, has made it harder for property companies to pay their debts. Sixty-five developers and real-estate brokers based in Spain have sought bankruptcy protection this year, according to Credito y Caucion, a Spanish credit insurer.

``This decision has been taken due to the grave cash-flow difficulties created by the inability to obtain a 150 million euro loan which the company needed for liquidity and to continue normal development of its projects,'' the company said in an e-mailed statement after a emergency board meeting in Madrid.

Trading in Martinsa shares was suspended earlier today in Madrid. Before the suspension, the shares fell as much as 29 percent to the lowest ever. Spain's five largest developers have lost 6 billion euros in market value this year.

The company has 5.2 billion euros of debt. Its assets, which include houses, holiday resorts, golf courses and shopping malls, are valued at 9.7 billion euros, down from 13 billion in June last year, according to regulatory filings.

`Contagion Effect'

``There are going to be more companies of this size and type seeking protection in the future,'' Paval Gomez del Castillo, a spokesman for Credito y Caucion, said by telephone before Martinsa made its announcement. ``The contagion effect on other developers is going to be notable.''

Martinsa-Fadesa was created by the 4-billion-euro acquisition of Fadesa Inmobiliaria SA by Grupo Martinsa last year. Chairman Fernando Martin is the largest shareholder, with a stake of 60 percent.

Martin and the company's management will retain their posts during the bankruptcy proceedings, the statement said.

To contact the reporter on this story: Sharon Smyth in Madrid at ssmyth2@bloomberg.net.

Last Updated: July 14, 2008 16:23 EDT