Crest Nicholson £630m debt-for-equity swap today

Crest Nicholson is set to announce a debt-for-equity swap today. Debt-holders will exchange £630m of debts for a 90% equity stake in the south of England house builder that went private at the peak of the housing market.

Crest was pulled off the Stock Exchange, where it had been a listed company, in May 2007 and taken private by 50:50 venture between HBOS and Sir Tom Hunter, Scotland’s richest man.

The struggle to restructure the new debt associated with the buy-out has proved irresolvable and the figure has crept up to a current figure of £1.2bn.

Stephen Stone, chief executive, told the Financial Times today: “It’s a significant sum of money to be converting into equity in the current climate and hopefully it’s a sign for other leveraged house builders that lenders still have faith in the business model.”

Elsewhere in the house building sector there are other mountains of debts still wobbling the foundations of the businesses they sit on:

Taylor Wimpey is negotiating its £1.6bn of net debt – two thirds of which has been built by management decision since the merger of Taylor Woodrow and George Wimpey in 2007

Barratt has a £1.4bn debt – basically the result of its sky-high offer for Wilson Bowden in 2007.

“The Crest Nicholson deal implies that about one-third of the company’s enterprise value has been written off since May 2007, says the newspaper.

In that time, both Barratt and Taylor Wimpey have lost two-thirds of their enterprise value.

Crest Nicholson’s senior debt-holders will take 86% of the group’s equity.

A balance of 4% will go to what are dubbed second lien debt-holders.

The remaining 10% goes to the management team.

That means Sir Tom’s private equity vehicle West Coast Capital has been totally wiped out.