Crest Nicholson in £500m debt-for-equity swap

Crest Nicholson is solving its unmanageable debt problem by talking its lenders into a debt-for-equity deal that would cut its borrowings from £1bn to £500m.

Crest had ground to a standstill on the repayment of the interest on its debts in October.

On top of that, the house builder was heading towards a potential breach of covenants in the next financial year.

Its major lenders have agreed to a debt restructuring plan, the result of this being that the level of debt will halve to £500m in exchange for them taking 90% of the equity, leaving management with the remaining 10%.

Today’s Financial Times reports: “Members of the senior bank group would end up holding the largest stakes, with the wider lender group holding smaller stakes.”

Crest was pulled from the Stock Exchange in May 2007 when Castle BidCo piled in with an offer worth £600m. Analysts, at that time, said it was fair value.

The joint bidders were Tom Hunter, the Scottish entrepreneur, and the HBOS bank.

The move will give HBOS a 45% stake in the company.

The FT comments: “Talks are on-going, however, in particular to secure support from some of the most junior-ranking creditors.”

In an earlier plan, HBOS had come up with the suggestion that it would inject £95m of new funds to get creditors’ consent to waive covenants.

“But that was rejected by lenders and a standstill was instead put in place,” says the FT.

The same paring of HBOS and Sir Tom Hunter also own McCarthy & Stone. They are said to have aimed to merge McCarthy with Crest prior to re-floating the new entity as a massive player on the UK housing scene.

That plan went up in flames as the market slid ever-lower after they made their eye-watering moves at the height of the market.

A debt-for-equity swap is also under discussion at McCarthy, says the FT.