Taylor Wimpey close to interest deferral agreement with lenders

Published 24th Dec 2008

Taylor Wimpey, Britain's largest house builder, said yesterday it expected to strike a deal with its lenders over a deferral agreement on its interest cover covenants.

The company, which said last month its net debt stood at £1.9bn, had warned it was likely to breach its banking covenants in early 2009 without a deferral deal.

In a statement yesterday, Taylor Wimpey said: "We have been progressing towards a deferral agreement with our lenders on these covenants.

These discussions are close to completion and we expect to reach an agreement prior to the end of the year." It added: "We are confident that a robust, stable medium-term financing solution for the group, which takes into account the requirements of all relevant stakeholders, will be achieved prior to the announcement of our preliminary results."

Taylor Wimpey shares eased back by 1.7% to 14.75p after the statement, which the company said it had released in response to press speculation and recent movements in its share price.

"It's a deferral of a final announcement," said Chris Millington, equities analyst at Numis Securities. "I think until we get some sort of formal announcement, these sorts of announcements prolong the issue."

Millington said the content of the company's statement did not come as a surprise. "It was so well leaked," he said. "There has been a lot of talk about this. It changes nothing at all."

It followed reports of a leaked internal email that said the company was making good progress with its debt talks.

The credit crunch has hit British house builders hard, making it more difficult for buyers to raise the level of mortgage finance that helped prices boom over the past decade. The fall in mortgage lending sent property prices spiralling and forced builders to cut back on projects and conserve cash.

There is little sign of respite for the industry. Data from the British Bankers' Association yesterday showed the number of mortgages approved for home purchase dropped to a record low in November.

In its interim management statement in November Taylor Wimpey said the housing market remained challenging, adding that it was keeping a tight control on build and overhead costs and had reduced its UK head count by about 1,900.

Source: ' Guardian '

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