Housebuilder's new financial deal fails with 900 redundancies expected
Shares in housebuilders crashed through the floor this morning as Taylor Wimpey revealed it had been unable to tie up a deal for new finance it had trailed on Monday.
Taylor Wimpey’s share price fell by 52% on the news, which has resulted in the departure of its finance director.
The company said it was now looking to make 900 people redundant, more than the 600 jobs previously rumoured to have been culled.
It is also understood that Taylor Wimpey is looking to offload its Taylor Woodrow construction arm. Redfern said the business was not a long-term core asset.
It said in a statement: “Without an amendment to the terms of our banking facilities, in certain negative market scenarios we might breach one or more banking covenants at the first testing date in 2009.
“We confirmed in our statement on 30th June that we were meeting with a number of existing and potential investors with a view to raising further equity capital. However, in light of current market conditions we have not been able to conclude a satisfactory transaction.”
Shares in Redrow fell as much as 30%, Barratt as much as 25% and Persimmon 20% on the news. At 9 AM Taylor Wimpey shares were down 47.9%.
Chief executive Peter Redfern said in an analyst conference call that the company had decided it did not want to make one small deal and return to the market to raise more money later, so had decided against going through with the planned deal.
On Monday the firm had said it had opened negotiations regarding a rights issue to raise money.
The firm also issued an unremittingly gloomy trading update today, saying sales were 45% down on last year, and the average cancellation rate for reserved homes was 29%, up from 19% last year. It also said it was reducing the selling price of homes in order to attempt to bring cash in to the business.
It said: “Our major markets are experiencing a significant downturn, characterised by significantly lower weekly sales rates and lower average selling prices than in recent years. We expect that the UK housing market will remain weak at least through 2008 and we do not anticipate any recovery in the short-term.”