Taylor Wimpey strikes rescue deal with banks

Taylor Wimpey is due to announce a relaxation of its lending covenants without the need for fresh equity, according to sources close to the talks between the housebuilder and its lenders Building can reveal

It is understood the company has struck the refinancing deal due to the recent improvement in housebuilders’ share prices and the fact Barratt recently clinched a similar agreement. Barring any last-minute hitches, it is expected to outline the deal at its results for the six months to 30 June 2008 next week.

The company has £1.7bn of debt and was expected to breach loan to value covenants in February. Last month it failed to raise £500m via a share placement after one investor backed out on the eve of the deal.

A source close to the talks said: “It looks like they have conjured something quite good and resolved their issues. The most likely outcome now is an all-debt solution among the lenders.”

Last month it appointed Rothschild to secure a similar deal to the agreement reached between Barratt and its lenders in July. The deal, revealed by Building, saw covenants relaxed without the need for fresh cash.

The source added: “Interest cover covenants will be turned into cashflow covenants in similar fashion to Barratt. The fact Persimmon called the bottom of the market on Thursday was also significant.”

Taylor Wimpey was unavailable for comment.

The group had reportedly been in discussions with four private equity groups about taking a 30% stake in the company, an option which has now been put on hold according to sources close to the talks.

A source close to one of the interested private equity groups said: “The message coming out of Taylor Wimpey in recent days is that it’s quite comfortable without the need for private equity cash.”