McCarthy & Stone in talks over £800m refinancing package

Published on Sunday 31 August 2008 21:40

AN £800 million refinancing deal is expected to be sealed in the next few weeks by embattled retirement homebuilder McCarthy & Stone, where Scottish billionaire Sir Tom Hunter has an 8 per cent stake.

McCarthy & Stone (M&S), in which banking giant HBOS is believed to have a 25 per cent-plus stake, is understood to have been in talks with its banks for many months about restructuring its loans and repayment timetables.

One source said: "M&S is not 100 per cent there yet on the refinancing, but it is a very solid business so everybody is pretty relaxed about the situation. It is getting there with the banks."

M&S's refinancing comes as another Hunter/HBOS housebuilding investment, Crest Nicholson, has conceded that it might break its lending agreements with its banks if the housing market continues to deteriorate.

In its first set of accounts since being taken private last year by Hunter and HBOS, Crest Nicholson said last week: "Financial forecasts, which take account of current market conditions, do not show any breaches of financial covenants.

"However, if the 2008 housing market proves to be significantly weaker than we expect, there is a risk that financial covenants will be breached. Contingency plans are in place to mitigate this risk."

M&S chief executive Howard Phillips called in investment bank NM Rothschild early in the summer to help him restructure the company's debt in the wake of the crisis in the housebuilding industry as a result of the credit crunch. The group was taken private in a heavily-leveraged 1.2 billion deal in 2006.

One analyst said yesterday: "To be frank, lots of housebuilders will have been talking about their covenants with their banks given what's happened in the sector.

"M&S is in a better position than some of its peers in these negotiations because it is seen as more robust than most in trading terms, given its customer demographic and the 'grey pound'. They will want to put the talks behind them, however."

It is believed that Rothschild expects to have a heads of agreement with M&S's banks by the end of September, or mid- October at the latest.

The aim would then be to formalise this agreement by the end of 2008, industry sources said.

The current key repayment dates are in 2012-14 and these are likely to be pushed back.