UPDATE 1-Property firm Urban struggles to find rehab sponsor

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TOKYO, Oct 16 (Reuters) - Failed Japanese property developer Urban Corp delayed the submission of a rehabilitation plan as it struggles to find a financial sponsor amid global financial turmoil, a person familier with the matter said on Thursday.

Urban, which had hoped to file the plan to the Tokyo district court by Nov 11, is now aiming to complete the plan by Dec 5, said the source who declined to be identified as the plan has not been made public.

"Because of the recent downturn in the financial market and worries over recession, it is becoming increasingly difficult to find a company willing to help (Urban)," the source told Reuters.

Urban spokesman declined to comment.

Urban filed for court protection from creditors on Aug. 13 with 256 billion yen ($2.56 billion) in debt, becoming one in a series of high-profile bankruptcies among Japanese property firms hit by tighter lending by banks amid the global credit crunch [ID:T92234].

In August, Urban said it had hired Deutsche Securities, a unit of the German bank, to find a financial sponsor. At that time, Urban's lawyer said the company had already been approached by potential suitors including real estate funds.

But recent sharp losses in financial markets are sapping sponsors' interest in investing in businesses seen risky, the source said on Thursday.

Urban's shareholders are also preparing to sue the company over the disclosure of a financial deal with French bank BNP Paribas (BNPP.PA: Quote, Profile, Research, Stock Buzz) [ID:SP373774]

On top of that, Urban faces a $15,000 fine charged by the Financial Services Agency for failure to properly disclose a critical term in a convertible bond deal with BNP Paribas. (Reporting by Mariko Katsumura; Editing by Kim Coghill)