Vocal minority of lenders push for equity guarantee as condition of refinancing package

Sources close to the crisis talks between Taylor Wimpey and its lenders have said a split has emerged between the company’s lending banks about the terms of a rescue deal.

The company is locked in talks with lenders about its debt-pile of £1.9bn and needs to reach an agreement to avoid breaching banking covenants and going into administration.

Wimpey sales board

It is understood some of its banks are demanding an equity guarantee such as warrants in exchange for any deal. Warrants entitle holders to buy shares at a future date at a specified price in the hope the company’s stock will rise.

The company has said the number of banks involved in talks runs into double figures. They include Lloyds TSB, Barclays, HSBC and RBS.

The source said: “A small and vocal minority of banks are leading the charge to get an equity upside. Taylor Wimpey looks to be relenting although nothing has been agreed yet. The debate is vigorous, intense and ongoing.”

It is understood that if a deal is reached and the banks receive an equity guarantee, the main obstacle to agreeing an overall refinancing package will be what rewards the bondholders and private placement holders get.

The source also confirmed that an emergency deal will be struck between the housebuilder and its lenders to prevent the company from breaching lending agreements in January.

Without a temporary solution, Taylor Wimpey will break banking covenants at the start of its new financial year on 1 January. Its share price has plunged in recent weeks amid fears a breach would see lenders pull the plug.

The source said: “The equity value of the company is already at rock bottom. Come January the banks will grind on with the due diligence to establish a final debt solution similar to the deal struck with Barratt in July.”

The source played down suggestions that a solution would see private equity investors get on board.

He said: “An all-creditor solution is still the most likely outcome. The private equity stories are more noise than substance and no talks have taken place. It would just add another layer of complexity that neither Taylor Wimpey or the lenders want.”

Who's owed what

Taylor Wimpey has debt of £1.9bn which is divided between its banks (£1.1bn), private placement holders (£380m) and bondholders (£443m). Such high debt in a falling housing market means it needs to find a permanent refinancing solution to survive.