Housebuilder Taylor Wimpey has posted annual losses of £1.97?billion but gave investors some cheer by agreeing a financing deal.
The lion’s share of the losses were down to £1.9?billion in write-downs on land values and goodwill from the merger of Solihull-based Taylor Woodrow and George Wimpey in 2007.
But shares jumped 9.5 per cent to a six-month high of 40.5 pence yesterday after the company revealed a deal to revamp its £1.57?billion debts was “substantially complete”.
It has overhauled its banking terms, giving it total facilities of £2.47?billion, although the cost of servicing the debt pile will rise.
Taylor Wimpey has cut more than 3,500 jobs since the merger but has outperformed market expectations so far this year. Chief executive Pete Redfern said: “Following complex negotiations, this financing package will allow management to run the business for the benefit of all stakeholders and gives the group flexibility to enable it to trade through the current downturn.
“Although we remain cautious about market conditions, current trading and the cash generation of the business are both encouraging,” he added.
Discounting the heavy exceptional costs, Taylor Wimpey made pre-tax losses of £74.7?million last year – more than double 2007’s £33.6?million slide into the red.
The company has been hit hard by falling land values and has cut its regional offices from 39 to 23 since the start of 2008.
Rivals Wolseley and Persimmon have also scrambled to refinance debt after being hit by the property market downturn, which saw West Midlands house prices dip 10.2 per cent last year.
In a statement to the London Stock Exchange, Taylor Wimpey said visitor levels and sales rates had improved this year.
But it warned: “We remain concerned about the sustainability of current conditions, due to uncertainty over mortgage availability and general economic conditions, particularly unemployment.”
Under the new financing deal, the company will extend all of its existing debt so it is due later than July 2012, but it has had to agree to a number of covenants, including maintaining minimum cash flow levels.
A £1.65?billion revolving credit facility will be cut by £235?million this financial year, £150?million in June 2009 and £350?million in 2010. If these reductions are not achieved, the company will be penalised with higher interest charges.
Lenders have also tightened the reins further with an annual cap on how much new land the company can buy.
The cost of servicing its debt will increase by 4.55 per cent a year, with Taylor Wimpey taking one-off costs of £60?million relating to concluding the refinancing.
Analyst Robin Hardy, of KBC Peel Hunt, said Taylor Wimpey remained on the back foot despite striking the deal, and would probably still have to raise more equity.
He said: “They have got a deal and with no debt-for-equity swap, so that’s a relief, but it still has to show it can fund itself when the market recovers.
“It’s important to get the facility reduced quickly and while they have 18 months to do that, the company won’t know until after the end of this financial year whether it can do it.’’