Sources say lenders are not interested in taking a stake in the housebuilder in exchange for debt refinancing deal
Sources close to the debt talks between Taylor Wimpey and its lenders have dismissed speculation that a debt-for-equity swap will form part of any deal.
Last month the housebuilder won vital breathing space to complete refinancing talks before the end of March amid reports lenders will take a single digit equity stake in the company in return for allowing a deal on its £1.9bn debt pile.
One source close to the talks said: “A debt for equity swap is not happening and it was never on the cards. Banks do not want a housebuilder on their balance sheet and lenders will only receive an equity upside via warrants.”
Warrants entitle holders to buy shares at a future date at a specified price. The source dismissed fears such a move could have a dilutive effect on Taylor Wimpey’s equity.
“The dilutive effect will certainly be less than 10%,” they said.
They added: “This is purely a sweetener for lenders, there is absolutely no desire to take a stake in the company.”
Numis analyst Chris Millington said a potential dilutive effect of less than 10% would be “very good news” for existing Taylor Wimpey shareholders.
As part of the refinancing deal, the source confirmed that Taylor Wimpey’s lenders will provide it with a flexible 18-month bridge facility on its debt.
They said: “It can be extended into 2011 if necessary.”
The source added the margin on the loan was still a “moving target” but will be about five percentage points above the inter-bank lending rate.
Unused debt facilities will also be scaled back but it is unclear by how much as each lender has its own bilateral agreement with the housebuilder.
It is thought all lenders are now on board with the refinancing deal but sales forecasts and numbers still have to be crunched.
The source said: “The delay is principally driven by Taylor Wimpey’s poor management information systems which need the help of KPMG to provide lenders with a clear outlook.”
As a result of the delays in obtaining clear forecasting data, a deal is not expected this month.