Taylor Wimpey in £510m cash call

Rhian Nicholson
08.05.09 12:12

Housebuilder Taylor Wimpey (TW-) is asking shareholders to stump up Ł510 million to help cut its Ł1.53 billion debt mountain and fund its future development.

Shares in the FTSE 250 group fluctuated wildly after it announced a placing and open offer of 2.13 billion shares. The shares are priced at 25p - a 48% discount to its closing price yesterday.

The move will enable it to save over Ł400 million in interest costs over the next three years, with Ł60 million for the remainder of 2009.

Taylor Wimpey, which was formed through the merger of George Wimpey and Taylor Woodrow in 2007, said the fundraising will allow it to avid the forced sale of its landbank to generate immediate cash, bring forward developments in the pipeline and enable it to buy up more land when the opportunities arise.

Taylor Wimpey chief executive Pete Redfern said the fundraising would place the company at "forefront of any housing market recovery".

"We have taken the difficult decisions necessary to protect the inherent value in the group. Whilst we remain focused on managing cash tightly, following this equity raise, we are now in a strong position to focus on a return to profitability," he added.

The housebuilder hopes the move is the next step on the path to recovery after recently completing a long-running refinancing of the business.

In April it secured bank facilities totalling Ł2.47 billion after finally getting the green light from bondholders. It was forced into debt talks last July after failing to raise Ł500 million through an earlier cash call that fell Ł60 million short of the target.

The company then had to ask its lenders to put back covenant tests twice as the talks dragged on for nine months.

Last year, Taylor Wimpey made a pre-tax loss of Ł1.9 billion as the housing market slumped, fuelling fears it could collapse under the weight of its debt.

Analysts say the move now piles the pressure on rival Barratt Developments (BDEV) to follow suit.

Gary Hobbs of Fortis Private Banking says: "This is the final plank which underpins Taylor Wimpey's future from a position where banks could have called time on the group, or a failed equity issue. Interest payments are considerably reduced and the deal provides flexibility such that it need not sell land assets in distressed markets, eases need to cut prices of houses and improves its position to take advantage of recovery when it comes.

"It also allows the group to pay a dividend when the time is deemed appropriate. The pressure is increased on Barratt who also need to come to the market - something the new finance director appointed yesterday will immediately focus on."

Taylor Wimpey in £510m cash call

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