Taylor Wimpey Can't Raise Cash, Shares Fall 49%

British housebuilder Taylor Wimpey has failed to raise the extra capital it said it would seek just two days ago, citing tough market conditions, sending its shares and those of its rivals plummeting.

Taylor Wimpey also announced its finance director would leave the company.


The housebuilder had been expected to unveil a capital injection of about 500 million pounds ($998 million) from shareholders and other investors to help see it through the credit crunch and the housing market downturn.

"We confirmed in our statement on 30th June that we were meeting with a number of existing and potential investors with a view to raising further equity capital. However, in light of current market conditions we have not been able to conclude a satisfactory transaction," Taylor Wimpey said in a statement on Wednesday.

Shares in Taylor Wimpey plunged 55 percent at the start of trading to 27 pence, and then hit a low of 25p before moving off the lows to close 46.3 percent lower at 32.25p.

Other housebuilders were also hit, with Barratt down 29 percent, Persimmon off 18 percent and Bovis Homes 9.6percent lower.

"The failure to raise fresh equity is a blow for both the group and the sector," Cazenove analysts said in a note.

"Trading conditions have deteriorated at an alarming rate, and we will be reviewing our profit and dividend estimates across the sector," they added.

Finance Director Peter Johnson is to stand down at the end of 2008 and the company has begun to look for a replacement.

Britain's biggest housebuilder by number of homes built does not expect a recovery in the UK housing market in the short term and does not expect any material recovery in the United States until at least 2009.

"Our major markets are experiencing a significant downturn, characterized by significantly lower weekly sales rates and lower average selling prices than in recent years," the company said in its trading update.

The company said housing reservations had declined sharply since its last update in April, with UK housing reservations down 45 percent year-on-year and both its order book and home completions down a third.

On Monday, the housebuilder had warned of a "significant downturn" in the UK housing market and an expected 660 million pound writedown in the value of its assets.

"The board remains convinced of the fundamental attractions of the business over the medium and long term. We will continue to evaluate options to secure that value for our shareholders," the company said on Wednesday.

Analysts have been warning that housebuilders, struggling after the global credit crunch ended a decade-long UK housing boom, are set for a round of refinancings as the market continues to deteriorate.

Taylor Wimpey, the most-indebted UK housebuilder alongside Barratt, had been forced to seek emergency funds as the weight of its net debt combined with sharp drops in sales put its balance sheet under pressure and threatened a breach of banking covenants with lenders.

"It is now a question of survival for the company and there may be some brinkmanship going on between the management and its owners but the bottom line is this remains one of if not the weakest player in this market," Landsbanki analyst Simon Brown said in a note.

"Our concerns over the net debt at Taylor Wimpey have be borne out with the 1.9 billion pounds at the end of Q1 only down to 1.7 billion at the half year, far higher than anticipated," he added.

The company said on Wednesday that net debt stood at 1.7 billion pounds at the end of June.

"We do not feel it is appropriate to propose an interim dividend for 2008. We will review our future dividend policy at the end of 2008 in the light of prevailing market conditions," Taylor Wimpey added in the statement.

Bonds of Taylor Wimpey dropped sharply on Wednesday after the statement, traders said.

Taylor Wimpey 2019 sterling bonds dropped to be bid at 40 percent of face value from mid-to-high 50s a day earlier, traders said, noting that the bonds were illiquid.