HOUSEBUILDER Taylor Wimpey confirmed yesterday it was looking to raise additional financing and said it may have to tap investors for the cash.
The firm said it was in fundraising talks with investors to cope with a "significant downturn" in the housing market.
Weekend reports claimed the amount the builder was looking for was as much as £500 million. The group said it was likely to gain
the funds though a placing and open offer of new shares.
But, in a move that could set the tone for the sector as it updates the City over the next couple of weeks, Taylor Wimpey confirmed it would write off £660m on the value of its landbank and work in progress due to tough market conditions.
It said: "Taylor Wimpey came into the year with a cautious outlook on the market and this has been borne out by recent experience. While the US market is showing signs of improving stability, in the UK market it has become apparent that we have entered a significant downturn."
The group said it was "moving proactively" to put a financial structure in place to withstand what it fears will be "sustained" weakness in the UK housing market.
The firm remains within the terms of its banking covenants, but has amended a condition based on the link between its interest payments and underlying earnings in favour of a measure of its ability to generate cash.
The change will "protect against the risk of further deterioration", although it is dependent on Taylor Wimpey raising the additional funds from investors.
The firm – formed through the merger of Taylor Woodrow and George Wimpey a year ago – has seen its share price slump and been relegated from the FTSE 100 index alongside other major builders such as Persimmon and Barratt Developments.
Taylor Wimpey has been hit hard by the US housing slowdown crossing the Atlantic with increasing pace.
Of the writedowns announced yesterday, the lion's share – £550m – relates to the UK market. The group has also taken a further £70m hit in the US and £40m in Spain.
The full article contains 358 words and appears in The Scotsman newspaper.
