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Taylor Wimpey to win debt breathing space

Taylor Wimpey will win vital breathing space to renegotiate its £1.9 billion debt mountain this week.

According to reports by the Sunday Times the house builder’s lenders will delay a test of its banking covenants due on 1 January to give it more time to rearrange its finances.

Construction News revealed last week how Taylor Wimpey was facing a New Year debt crunch with creditors expected to call on the house builder to reveal its debt position.

Analysts believe that Taylor Wimpey will have breached its debt covenants, entitling creditors to demand immediate repayment.

But the reprieve will come as a much needed boost to Taylor Wimpey bosses.

It is thought that Taylor Wimpey will be forced to offer its lenders an equity sweetener – most likely a single-digit stake in the business – as part of any refinancing deal.

The banks are expected to charge the company much higher interest rates in exchange for waiving the existing lending agreement.

Bankers for Taylor Wimpey are expected to postpone a crucial covenant test on its loans to give the builder more time to restructure its finances.

Taylor Wimpey’s shares have been hammered during the past year amid the housing slowdown and it will be ejected from the FTSE 250 tomorrow as part of the latest reshuffle.

But the firm, which was in the FTSE 100 as recently as March of this year, has seen its share price rise by 41 per cent since Construction News exclusively leaked a reassuring email from chief executive Pete Redfern to his staff.

Taylor Wimpey has suffered amid the housing market troubles, revealing in August that it racked up huge £1.54 billion in losses for the first six months of the year.

It has shed almost 2,000 staff in the UK this year and been hit by housing market woes on both sides of the Atlantic.

The mammoth dive into the red came after writing off £586 million from its UK land portfolio and more than £816 million linked to goodwill from last year's merger.