Taylor Wimpey shares surge on hope of lending deal

Taylor Wimpey shares have surged for the second day running amid speculation that some form of equity deal will be struck with its lenders.

They were up from a low of about 4p two days ago to 12p in early trading this morning.

It is also thought that shares have rebounded since insurance group Axa dramatically reduced its holding earlier this week from 11% to 2.7%.

One analyst said: “Axa got rid of 83.5 million shares, which would probably have had a lot of interest from private investors who thought the company was worth a punt at such a low share price.”

Building revealed on Wednesday that a “small and vocal” minority of the housebuilder's clearing banks were pushing for a deal that involved a slice of equity.

It is understood that any deal would not involve a traditional debt-for-equity swap but would see some or all of its banks take warrants or convertible bonds in the company.

It's not right to say Taylor Wimpey has caved in yet, but it's fair to say it's relenting

Source close to the debt talks

The bonds could be converted into equity at a future date, while warrants entitle holders to purchase shares at a future date at a specified price in the hope that the vale of a company's stock rises.

A source close to the debt talks said: “It's not right to say Taylor Wimpey has caved in yet, but it's fair to say it's relenting.”

According to a source, the main obstacle to reaching an overall refinancing deal will be what compensation the bond holders and private placement debt holders will receive if the banks take equity. They are owed £823m between them.

One analyst said: “I presume they are not interested in equity if they are holding debt instruments. A sweetener deal could see them get repaid quicker or their debt take seniority to the clearing bank debt.”

According to the source close to the talks, discussions have been heated in recent days. “Discussions are vigorous, intense and ongoing,” he said.