UPDATE 1-Martinsa Fadesa may not need to sell assets -source

By Elena Moya

LONDON, July 17 (Reuters) - Spain's Martinsa Fadesa (MFAD.MC: Quote, Profile, Research) may not need to sell assets during its administration process if a new debt refinancing agreement is reached with creditors, a source involved in the situation told Reuters.

Under Spanish administration law, a deal now needs only 50 percent consensus to be reached, facilitating an agreement amongst creditors.

"We have to reach an agreement - if there's an agreement, it won't be necessary (to sell the assets)," the source said.

A judge in La Coruna, where Martinsa Fadesa filed for administration with 5.4 billion euros ($8.59 billion) of debt, will soon appoint three administrators, including one lawyer, one accountant and a creditors' representative, the source said.

The administrators will oversee the negotiations led by the company's board and its legal advisor, Gomez Acebo.

The Spanish administration process also allows the company to win discounts over its debt, of about 10 percent, nearing positions towards an agreement, which could also extend payment dates, the source said.

The international banks and hedge funds that imposed tough conditions on the company's failed restructuring agreement will now be left out -as the board will only need 50 percent approval on any deal- making a solution more likely, the source said.

Martinsa Fadesa's debt was opened to hedge and vulture funds after one of its lenders, U.S. investment bank Morgan Stanley (MS.N: Quote, Profile, Research) sold some of its debt to reduce risks.