Lloyds £50m debt swap deal secures Tulloch’s future

LLOYDS Bank has carried out a second massive debt-for-equity swap at Scots housebuilder Tulloch Homes that will “secure the future” of the business but will also see it post losses of £65 million.

It is understood that the lender has written off £50m of Tulloch’s £145m debt, on top of the £30m refinancing the bank mounted in December 2009.

Bank of Scotland, now part of Lloyds, bought its original 40 per cent stake in the Inverness-based firm in April 2008 for £27.5m. The bank will be issued with further “preference shares” as a result of the latest deal, which do not carry voting rights.

Lloyds now has 90 million preference shares in Tulloch, which would have to be bought out in any takeover.

News of the deal came yesterday as Lloyds carried out a similar debt-for-equity swap at Gladedale Group, the developer behind the Quartermile project on the former Edinburgh Royal Infirmary site. Gladedale’s refinancing is believed to be valued at around £100m, but the bank and the developer both remained tight-lipped over any details of the debt-for-equity swap.

Lloyds’ deal with Gladedale also saw the firm’s £455m lending facilities extended for a further two years to 2014. Accounts filed at Companies House showed borrowings had totalled £533m at the end of 2010.

Commenting on the Tulloch deal, chief executive George Fraser, who took over from long-serving boss David Sutherland in January, said: “This announcement is extremely good news for Tulloch, our people, our customers and the local economy.

“It cements the future of the company and means we can plan ahead with confidence. The deal places Tulloch on a secure, sustainable financial footing and we are forecasting a return to profit in the next financial year.”

Under the refinancing, Tulloch – which has 120 directly employed staff – will write down the value of its land and unsold houses by some £56m, which will lead to a loss of £65m for the 18 months to 30 June.

The firm had posted a loss of £7.2m for 2010 after a £2.9m write down. Fraser said: “For virtually every housebuilder throughout the UK, the property downturn over the past four years has been challenging.

“Although Tulloch has fared better than most, with a relatively-buoyant Inverness market, it has, nonetheless, been affected by the conditions prevailing since the 2008 financial crisis.”

Tulloch now expects to build about 200 homes a year following the deal.

“We now have a robust, realistic and well-financed business plan, for the period ahead. We are confident of the financial performance of the company in the years ahead,” assured Fraser.

Tulloch returned to the Edinburgh housing market in January following a decade’s absence when it unveiled a £4m housing development at Drumbrae.

Sutherland stepped down as chief executive at the housebuilder at the turn of the year following three decades at the helm.

The Highland businessman, who is president of Inverness Caledonian Football Club, has since announced investments in his holiday cottage business and in Aberdeen-based human resources firm Empire to fund a Central Belt expansion.