Taylor Wimpey debt climbs to £1.9bn

The level of net debt being carried by Taylor Wimpey (TW) has risen even higher and now runs at £1.9bn.

The house builder said this morning that it is keeping under review “other strategic options” in its unsuccessful attempt to rein the figure in.

Adding pressure to the current situation is the announcement that further write-downs on the value of its land bank are on the cards.

Prior to this morning’s debt revelation, TW had been running with a debt figure of £1.7bn.

The rise of £200m in the net debt figure comes hard on the heels of the weekend revelation that private equity firm TDR Capital is waiting in the wings with a view to snapping up an equity stake in TW in exchange for an injection of much-needed cash.

In an interim management statement, published on the Stock Exchange today, TW said it was in negotiations with its current debt providers, including some of the holders of its traded Eurobonds.

TW is hoping to find “a stable medium-term financing solution”.

The company added: “The interests of these various stakeholder groups mean that these discussions are complex and it therefore remains likely that a revised covenant structure will only be concluded early next year”.

TW’s financial clock is ticking down: it needs to complete discussions before 7 February 2009 otherwise the current holders of £450m of bonds could ask for their money back.

Some of TW’s present loans are on the basis of TW’s credit rating being investment grade, with BB-plus being the lowest category that falls in this ‘blue chip’ range of grades.

TW currently earns only a BB-minus credit rating, having slipped from one grade above the investment grade threshold to two grades below – the territory of junk bonds – in the space of just five weeks.

Today’s trading update reports on the UK housing operation:

Private reservations for the second half of 2008 to date average 165 a week which is 27% below the second half of 2007.

“Having secured the sales that we require for this year, we expect to maintain prices at current levels for the next few weeks,” said TW.

The number of outlets is down from 500 to 400.

Build rate is running below current sales rates, at around 40% of normal levels.

“We have made good progress in reducing the level of unsold completed homes by around 35% since the half year to approximately 1,300 homes, amounting to around eight weeks of supply at current sales rates,” said TW. “Both our stock and that of the industry in general is at reasonable levels.”  

Affordable housing will account for 22% of sales in the full year, up from 15% in 2007.

Headcount in the UK is down by 1,900.  

Land purchase commitments have been juggled and the cash outflow in respect of land to the end of 2009 has been axed by a further £75m.

TW comments: “The absence of any improvement to current market conditions increases the likelihood that the Group will need to make further provisions against its land and work in progress.

There will be more news on this front in March when the full-year results are announced.