Sharewatch: Hooligans at the poker table

Against the backdrop of the government’s epochal intervention in the banking system, a game of poker began at the housebuilder this week.

On one side of the table are bondholders, which are owed a £450m slice of the housebuilder’s £1.7bn debt. On the other are the banks, which have agreed to keep the company afloat by waiving covenants.

If covenants are breached, bondholders can demand their cash back early and scupper any deal. Some argue that there is already a breach given the fact the company’s bonds are no longer rated as investment grade.

As one analyst noted: “The deal now comes down to whether there are any ‘hooligans’ among the bondholders that want to cause trouble.” As one source close to the talks euphemistically put it: “These things are never smooth.” So would the banks buy out any unruly bondholders if it was the only way to get the deal done?

Bankers were understandably unwilling to show their hand but one informed observer said: “If it came to it, they probably would.”

As the graph shows, all this uncertainty has done little for Taywimp’s share price over the past week and the stock is worth a tenth of what it was eight months ago. Some investors have clearly given up on it.