Struggling housebuilder Taylor Wimpey (TW.) staged a recovery on reports it could raise funds by selling a third of the company to a private equity buyer.
The builder is considering the stake sale as an alternative to a £500 million share placing as it looks to shore up its finances.
The speculation, by Building magazine, caused shares to jump and gave the firm a welcome boost at the end of a very difficult week.
Sources close to the firm have said that a deal could be “months rather than weeks away” however, investors eager for any good news in the housing sector clung to the lifeline although some were still taking a more neutral stance, preferring to wait and see what would happen in the wider market.
Taylor Wimpey announced last week that it would be cutting 900 jobs in the UK and while it has not confirmed where the jobs will be lost, there is speculation in the Midlands that regional centres in Wolverhampton and Leicester will be casualties.
The company disappointed the market when it revealed it had been unable to secure the multi-million refinancing package it was hoping to attract.
Last week it was forced to admit it had yet to agree a satisfactory funding package, a move which meant the company was in danger of breaching “one or more” of its banking covenants next year if the market continued to weaken.
The sorry picture worsened when the company revealed that housing completions fell by a third during the first six months of this year with reservations down 45 per cent.
Taylor Wimpey is by no means the only company to have struggle in the past two weeks – Barratt Developments (BDEV), Persimmon (PSN), Redrow (RDW) and Bovis (BVS) have all announced job losses and cutbacks as the market turns against their business in the wake of the credit crunch and declining house sales.
In the Midlands, Barratt has axed 50 jobs in Halesowen, while Perisimmon has said 280 jobs will go – almost a quarter of its total redundancy package.
On a local level, the past week has seen the loss of more than 150 jobs with the collapse of the Chase Norton Construction business plus the Chase Midland holding company and two subsidiaries.
Administrators are currently trying to find buyers for the stricken businesses.
Predictions are that the past week has seen the loss of around 5,000 jobs in the building sector and there is speculation that many thousands more could follow if the situation continues to worsen.
Taylor Wimpey, which is Britain’s biggest housebuilder in terms of houses built and which is axing 900 jobs in total, said: “We expect that the UK housing market will remain weak at least through 2008 and we do not anticipate any recovery in the short-term.”
Rival Barratt Developments, which has also cut 1,200 jobs, said on Thursday it had struck a “prudent” deal to extend the repayment of £400 million of debt and had renegotiated its banking agreements to give the firm financial breathing space.
The firm is labouring under a £1.7 billion debt burden following its acquisition of rival Wilson Bowden in February last year at the top of the market.
The construction supply sector is also struggling and analysts have issued downgrade warnings against brick supplier Wienerberger and cement firms LaFarge and Holcim, all of which have operations in the Midlands.
Wienerberger chief executive Wolfgang Reithofer said the company would close around 25 smaller plants in Europe. He declined to give details, but added closures were most likely in weak markets such as Britain and Germany.
The Austrian company is the parent of Sedgley-based brick supplier Baggeridge, which is acquired last summer.