TAYLOR Wimpey Plc, reeling from the worst British housing slump in 30 years, will write down 660 million pounds (US$1.3 billion) of real estate and plans to raise cash from investors.
Taylor Wimpey, down 71 percent this year in London trading, also suspended a profit-based loan covenant to guard against any deterioration in the market, the company said yesterday.
"In the short term, it's enough to cope with some of their problems if they can achieve this," said Mark Hughes, an analyst at Panmure Gordon & Co in Liverpool. "I'm surprised they've written down their land so much in the UK so early on in the down cycle."
British builders face "considerable" risks as house prices fall 10 percent this year and the volume of homes built drops 30 percent, Credit Suisse analyst Harry Goad said in a note last week. Mortgage approvals fell to the lowest in at least nine years in May, according to Bloomberg News.
London-based Taylor Wimpey, formed by the 4.3-billion-pound merger of Taylor Woodrow and George Wimpey last year, said yesterday that the British market has entered a "significant downturn."
Britain's top home builder fell as much as 7.7 percent to 57.25 pence and was trading at 57.75 pence at 9:13am local time yesterday. Taylor Wimpey's value has slumped to below 700 million pounds. A share sale will be "highly dilutive" to earnings, said Merrill Lynch analyst Mark Hake.
Price slump
The UK's 19-billion-pound home building industry is bearing the brunt of the collapse in subprime mortgage markets that's led to almost US$400 billion in losses at banks and securities firms.
British mortgage lenders have refused to pass on three Bank of England interest rate cuts since December and have withdrawn loans for buyers with smaller deposits. This has starved first-time buyers and buy-to-let investors of credit and pushed down house prices.
Taylor Wimpey will write down UK land and projects by 550 million pounds. Further charges of 70 million pounds and 40 million pounds will be made for sites in the United States and Spain.
"The industry and the group are not out of the woods," said Merrill's Hake, who rates the builder "underperform."