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Taylor Wimpey confirms talks with shareholders about new money to prop the business up
Taylor Wimpey, the country's biggest housebuilder by volume, confirmed it is in talks with shareholders Legal & General, Standard Life and Barclays among other core investors about raising additional financing, which would most likely be via a placing and open offer.
The company also said today it expects around £550 million in writedowns in the UK.
In a statement Taylor Wimpey said it had agreed an amendment to the terms of the revolving credit facility with its banks, including the suspension of a covenant based on net interest in relation to EBITA, as it prepares to withstand what is sees as a "significant downturn" in the housing market.
The business, which has been hit hard by a slump in new orders due to the credit crunch, hopes to have £500million of new money in place by Wednesday when it is expected to use a scheduled trading statement to issue a profit warning and announce a cut in dividend alongside a gloomy assessment of the market.
A wide group of key shareholders controlling more than a quarter of the company are believed to be broadly supportive of the fundraising move which is designed to avoid raising money through a dramatic landbank sell-off at the worst possible time in terms of values.
The Taylor Wimpey board is also in talks with its main lending banks in an effort to encourage them to be flexible at a time when lending covenants might otherwise be broken.
Peter Redfern, the group's chief executive, has already wielded the axe inside the company in an effort to cut costs, closing 13 of its 39 UK offices with the loss of 600 jobs.
Taylor Wimpey completed 14,862 British homes in 2007 but has found consumers unwilling to buy without significant price discounts. The North American business is also being hit hard by the credit crunch and TaylorWimpey has already written off £283million on that side of the Atlantic.
The problems are widespread in the house building sector with repeated warnings by rivals such as Redrow about the dire conditions in the market.
Property analysts at investment bank UBS have talked about an "armageddon scenario" where house prices have fallen 20% by the end of next year.
Barratt Developments, the UK's second largest volume housebuilder, was recently forced to reassure the City about its financial position after a slump in its share price put question marks over its survival in what some fear could eventually turn into a rerun of the 1990s house price crash.
Barratt is also in talks with its banks as it struggles with a £1.7billion debt mountain. Taylor Wimpey has even larger borrowings, of £1.9billion. Both companies recently made substantial acquisitions, Barratt buying Wilson Bowden for £2.2billion and Taylor Woodrow in a £5billion merger with Wimpey.
Last Friday shares in Taylor Wimpey topped the FTSE 250 index, rising 12% to 62p after broker Panmure set a 105p price target, on hopes that a rescue package could be tied up with investors. The TW share price had crashed from a 2007 high of more than 350p to less than 50p this year..
The company also said today it expects around £550 million in writedowns in the UK.
In a statement Taylor Wimpey said it had agreed an amendment to the terms of the revolving credit facility with its banks, including the suspension of a covenant based on net interest in relation to EBITA, as it prepares to withstand what is sees as a "significant downturn" in the housing market.
The business, which has been hit hard by a slump in new orders due to the credit crunch, hopes to have £500million of new money in place by Wednesday when it is expected to use a scheduled trading statement to issue a profit warning and announce a cut in dividend alongside a gloomy assessment of the market.
A wide group of key shareholders controlling more than a quarter of the company are believed to be broadly supportive of the fundraising move which is designed to avoid raising money through a dramatic landbank sell-off at the worst possible time in terms of values.
The Taylor Wimpey board is also in talks with its main lending banks in an effort to encourage them to be flexible at a time when lending covenants might otherwise be broken.
Peter Redfern, the group's chief executive, has already wielded the axe inside the company in an effort to cut costs, closing 13 of its 39 UK offices with the loss of 600 jobs.
Taylor Wimpey completed 14,862 British homes in 2007 but has found consumers unwilling to buy without significant price discounts. The North American business is also being hit hard by the credit crunch and TaylorWimpey has already written off £283million on that side of the Atlantic.
The problems are widespread in the house building sector with repeated warnings by rivals such as Redrow about the dire conditions in the market.
Property analysts at investment bank UBS have talked about an "armageddon scenario" where house prices have fallen 20% by the end of next year.
Barratt Developments, the UK's second largest volume housebuilder, was recently forced to reassure the City about its financial position after a slump in its share price put question marks over its survival in what some fear could eventually turn into a rerun of the 1990s house price crash.
Barratt is also in talks with its banks as it struggles with a £1.7billion debt mountain. Taylor Wimpey has even larger borrowings, of £1.9billion. Both companies recently made substantial acquisitions, Barratt buying Wilson Bowden for £2.2billion and Taylor Woodrow in a £5billion merger with Wimpey.
Last Friday shares in Taylor Wimpey topped the FTSE 250 index, rising 12% to 62p after broker Panmure set a 105p price target, on hopes that a rescue package could be tied up with investors. The TW share price had crashed from a 2007 high of more than 350p to less than 50p this year..
Mon, 30th Jun 2008