FRANKFURT - The decade-long crisis in the German construction sector deepened on Tuesday as Walter Bau, the country's fourth-biggest builder, filed for bankruptcy protection after failing to secure financing from its creditors.

Walter Bau, based in Augsburg in southern Germany, informed the stock exchange in a short statement that it was filing for insolvency in a last ditch attempt to save the company. "Despite major efforts on the part of the company and of the financiers, we have not been able to secure the liquidity of Walter Bau. Management has therefore decided to file an application with the court in Augsburg for the commencement of insolvency proceedings," the statement said.

"We see insolvency as the last chance to save essential parts of the company and jobs," Walter Bau said.

By filing for insolvency, a company receives court protection from its creditors, giving it time to restructure debt and try and find a new investor.

The Augsburg court confirmed receipt of the insolvency application.

Walter Bau shares plummeted in the wake of the announcement, tumbling by 68.5% to E0.75 on the Munich stock exchange.

The failure of Walter Bau comes three years after the spectacular collapse of German construction giant Philipp Holzmann and highlights the crisis the industry has been entrenched in since the end of the post-unification building boom in the mid-1990s.

Holzmann initially ran into difficulty in 1999, but was saved in a government-engineered bailout. However, it failed to return to profit and finally went bust in 2002.

The government under Gerhard Schroeder appears unwilling this time to come to Walter Bau's rescue.

Economy Minister Wolfgang Clement said in a statement that the latest developments were "regrettable", but that "despite intensive efforts ... it is not possible to avert" insolvency.

Clement noted that the insolvency filing applied only to the holding company Walter Bau and that the various operating subsidiaries "can and will continue to operate."

"We assume that the court-appointed administrator will secure and maintain substantial parts of the group and as many jobs as possible," the minister said. Walter Bau, which employs more than 9,000 people, had presented its 27 creditor banks with a new restructuring plan last month, which entailed E150-million ($196-million) in divestments and stringent cost-cutting of up to E60-million per year.

In return, the building company hoped to convince all of its creditor banks to extend a E200-million credit line and a E1.5-billion loan guarantee.

But while the majority of the banks creditors had supported the restructuring plans, one or two banks, reportedly ABN Amro and Bankgesellschaft Berlin, thought the restructuring did not go far enough and demanded additional belt-tightening.

And without unanimous approval of 27 banks, credit could not be extended. "Individual financiers have made additional conditions that have delayed the whole process, meaning that the short-term supply of liquidity has not been possible," Walter Bau complained, without naming the banks.

On top of that, the public debate about the state of the company's finances had harmed business and deflected new orders, "thereby making the liquidity situation even more difficult."

The German construction industry is facing its 11th consecutive year of crisis this year, forecasting falling sales again in 2005.
Walter Bau's founder Ignaz Walter blamed his company's woes on the poor payment morale in Germany, pointing the finger at public-sector clients and railway operator Deutsche Bahn in particular. Unlike its better-performing rivals such as Hochtief and Bilfinger Berger, which have built up substantial operations outside Germany, Walter Bau generates most of its output from its domestic market.

Walter Bau ranks number four in the German construction market behind Hochtief, Bilfinger Berger and Strabag.