£500m cash injection for Taylor Wimpey

Housebuilder Taylor Wimpey is close to receiving a huge cash injection in a bid to shore up its balance sheet.

The rescue is being co-ordinated by investment bank UBS, and JP Morgan Cazenove.

The agreement, which is believed to raise as much as £500 million could be reached by Wednesday, at which time a trading update is due, which is expected to be downbeat.

Chairman Norman Askew, and chief executive Peter Redfern, are conducting talks with its banks to relax lending covenants on bank debt of £1.9 billion.

Its largest shareholders, who are supporting the proposal, are Alliance Bernstein, Legal & General, M&G, Scottish Widows, Standard Life and Toscafund. Between them, they hold over 25% of the company’s stock.

As well as the shareholders, several high-profile hedge funds, including Och Ziff, have been approached by UBS to pump funds into the housebuilder.

The proposal is for the placing to be underwritten and to give other smaller investors an opportunity to participate.

The entire housebuilding sector has been suffering of late due to the credit crunch and housing slowdown. The company recently announced it was to close 13 of its 39 offices across the UK.

Other housebuilding giants Bovis Homes and Persimmon have announced warnings lately and the latter recently confirmed that it is to stop building on new sites until market conditions improve, which could result in tens of thousands of job losses.

Taylor Wimpey was formed by the merger of Taylor Woodrow and George Wimpey last July and is one of Britain’s largest housebuilders.

It also has a large presence overseas and is currently building houses in Florida, San Francisco and Texas. In Europe, the group has divisions in Spain and Gibraltar.

Since the start of the year, the company has lost 80% of its stockmarket value and is now worth just £650 million.

The group is sitting on a valuable land bank, however, like many of its indebted sector peers, it requires extra funds to guide it through the current economic climate.

Last Friday, shares in the company soared by 12% on the belief that a rescue capital injection was imminent.

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