New financing deal for Taylor Wimpey

Jim Moore
07.04.09 13:34

Builder Taylor Wimpey (TW-) received a much needed lift today after agreeing a fresh financing deal which should spare its shareholders from a future cash call.

The troubled company has secured a �2.47 billion financing package after intense talks with banks and bondholders.

However, while the covenants it is required to meet by its lenders have been eased significantly, the company will be faced with caps on land purchases and other operational requirements designed to protect creditors.

The ongoing cost of servicing the debt will rise by 4.55% a year with the potential for additional penalty rates if the company fails to lower its debt pile by the middle of the year with more reductions pledged for 2010.

Lending banks and bondholders will also have the right to subscribe for a stake of up to 5% in the company at 25p a share. At 15:38, its shares were up 2.5p at 39.25p.

Taylor Wimpey currently struggles under a �1.57 billion debt pile and has been grappling with the effects of the economic downturn and house price collapse on both sides of the Atlantic.

In yesterday's deal announcement the scale of its problems were made clear with the company reporting a pre tax loss last year of �1.97 billion against a loss of �33 billion the previous year.

The company actually made an operating profit of �86.3 million, but that was wiped out by the �168.6 million costs of servicing its debt. The company was also forced to take write downs of more than �1.8 billion on the value of its land bank, work in progress, and on goodwill.

The left the business mired in the red although there was a small piece of good news in the figures - the company said current trading was slightly ahead of expectations.

In its statement the Taylor Wimpey said it believe the new financing package should allow it to trade through the downturn and it was taking firm action on controlling costs, reducing liabilities and generating positive cash-flow.

It went on: "We believe that the prospects for both the UK and North American housing markets remain attractive in the medium and long term due to the positive demographic trends in both markets, and particularly due to constrained land supply in the UK.

"The structure of the revised financing package gives shareholders the opportunity to benefit from future recovery and mitigate the costs of financing as market conditions improve."

New financing deal for Taylor Wimpey

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