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July 2, 2008    

Taylor Wimpey fails to secure funding, shares fall 46%

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by Kay Murchie
Taylor Wimpey fails to secure funding, shares fall 46%

Housebuilder Taylor Wimpey has announced that it has failed to secure £500 million from shareholders in a bid to shore up its balance sheet.

Following the news today, shares in the company plummeted 46% to 32.25p.

The company, which was formed by the merger of Taylor Woodrow and George Wimpey last July, said that if it is unable to raise new capital, it may breach its banking covenants next year.

The company has experienced a fall in reservations of around 45% during the first 6 months of 2008 and said it is to close 13 of its 39 regional offices, which represents around 900 jobs.

It believes that the UK housing market will remain weak throughout the year and does not anticipate any short-term recovery.

The entire housebuilding sector has been suffering of late due to the credit crunch and housing slowdown.

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’s finance director, Peter Johnson, who is to step down at the end of the year, said a considerably downturn is being experienced in major markets.

Investment bank, Dresdner Kleinwort, believes that there is a very real danger that Taylor Wimpey faces collapse.

The group is now concentrating its efforts on cutting costs and slashing the price of its homes in a bid to improve sales and cashflow.

Chief executive, Peter Redfern, said the plan is still for the group to raise funds. He added that the company has the time and options to complete the capital raising in the short-term and is not ruling out any funding options.

Rival house builder, Barratt Developments, is rumoured to be close to securing a rescue refinancing with lenders that will relax its banking covenants and help it through the property slowdown.

Investment bank NM Rothschild has been hired, as has a restructuring team from Deloitte to negotiate with its lenders. The deal has been preliminarily approved by its banking syndicate which comprises Barclays, HSBC, Lloyds TSB and Royal Bank of Scotland.

However, the refinancing will be a coup for Barratt, which, unlike Taylor Wimpey, has not had to ask shareholders for a bail-out.

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