Wed 2 Jul 2008
Taylor Wimpey executive to go after failing to secure finance
Taylor Wimpey has announced the departure of its finance director, Peter Johnson, after failing to secure capital from shareholders and potential new investors. The company has now admitted that it could breach banking covenants unless the housing markert recovers.The company’s share price plunged 58% to 25p at the open of trading today, sparking a virtual freefall in the sector, with housebuilders such as Barratt Development, Persimmon and Redrow also adversely affected.
Talking about the company’s inability to strike a deal, which would have been worth around £500m, Pete Redfern, chief executive, said: “Put simply, the negotiations were impacted by market movements in the past couple of days – both in housebuilding and generally.
“Existing shareholders were happy to support the deal, but in the short timeframe we were unable to attract new investors.”
He added: “We’re going to draw a line underneath the process for now. We have quite a lot of time in which to complete this, we are not hitting a brick wall.”
The departure of finance director, Peter Johnson, will see him become the biggest UK executive casualty so far of the housing downturn.
The news comes after the company posted a rather grim trading update which reveals that its private housing net reservations have fallen by 45% year-on-year during H1 2008.
The fall in activity levels has seen Taylor Wimpey close one-third of its UK offices in recent weeks, continue not to buy any further land and scrap dividend payments in order to preserve cash. The company’s net debt currently stands at £1.7bn, down £200m on April.
The company said: “Without an amendment to the terms of our banking facilities, in certain negative market scenarios we might breach one or more banking covenants at the first testing date in 2009.”
A number of other housebuilders are expected to require new capital, unless the market recovers soon.
Posted by Marc Da-Silva
in Barratt Development, News, Persimmon Homes, Peter Johnson, Peter Redfern, Redrow, Taylor Wimpey on Wed 2 Jul 2008