Taylor Wimpey's shareholders to stump up £510m of new cash

Taylor Wimpey (TW) shareholders are being asked to stump up £510m to put the house builder’s finances on a better footing.

The deal, whereby TW shareholders receive a 1-for-1 offer based on the number of shares they already own, will result in the creation of 2.1bn new shares in addition to those already in circulation.

The money will be used to pay down TW’s mountain of debt which is costing the earth in interest charges.

Norman Askew, chairman of TW, said: "This fundraising builds on the recently announced amendment of our debt facilities to strengthen our capital structure.

“Taylor Wimpey is now better positioned to take advantage of the opportunities offered by our existing asset base and any future upturns in our markets."

Pete Redfern, chief executive, added: "We have taken the difficult decisions necessary to protect the inherent value in the group.

“While we remain focused on managing cash tightly, following this equity raise, we are now in a strong position to focus on a return to profitability and to place Taylor Wimpey at the forefront of any housing market recovery."

The move improves the structure of the group’s balance sheet and follows the recent amendment of its debt facilities, which was concluded on 30 April 2009.

The entire net proceeds of £510m will be used to reduce the group's debt, says TW

Based on current net debt levels, the fundraising will deliver interest costs savings that are expected to exceed:

• £60m for the remainder of 2009
• £145m in financial year ended 31 December 2010
• £220m in financial year ended 31 December 2011

In particular, it will assist the Company to:

• retain landbank assets rather than crystallising value in depressed market conditions in order to satisfy immediate cash needs
• bring forward development on new site
• adjust its sales and pricing dynamics at a site level with the goal of delivering future margin improvement