TAYLOR Wimpey, Britain's largest house builder, faced an uncertain future last night after shareholders refused to back a £500 million emergency cash-raising plan and hundreds of jobs were axed.
The news cast a shadow over a sector rocked by a string of dire warnings as the credit crunch intensifies. Shares in Taylor Wimpey shed more than half their value, before rallying slightly to close down 42 per cent at 35p.
Rivals Barratt Develop
ments and Persimmon dropped 29 per cent and 18 per cent respectively.
Taylor Wimpey, formed from a merger of Taylor Woodrow and Wimpey last year, said its problems stemmed from a "significant turndown" in its major markets, the UK and US, and warned that any short-term recovery was unlikely.
To counter this the company has stopped buying new land, cut its sales prices and is busy renegotiating contracts. Thirteen of Taylor Wimpey's 39 regional offices, including two in Scotland, are being shut as the company makes 900 redundancies to cope with the slowdown.
On Monday, Taylor Wimpey confirmed it needed cash to strengthen its balance sheet to prevent it breaching banking covenants, but it said yesterday it had failed to attract sufficient support from outside investors.
Taylor Wimpey chief executive Pete Redfern said the firm was still in talks with investors and was confident it would get the cash it needed. The group also announced the resignation of finance director Peter Johnson.
Redfern insisted the company had time on its side to complete a financing deal.
"We have got a significant period of time to complete the (cash] raising. We don't see covenant breaches or cash shortages during 2008," he said.
Housebuilding has been the worst-affected sector of the credit crisis, with a slowdown in mortgage approvals causing sales to dry up.
Several housebuilders have taken extreme measures, such as lengthy interest-free loans, in a bid to boost sales.
Analysts warned that Taylor Wimpey's survival, and that of some of its rivals, could now be in doubt, after the firm revealed higher-than-expected net debt of £1.7 billion.
Dresdner Kleinwort analyst Alastair Stewart said Taylor Wimpey's statement "could not be more grim" and withdrew his target price.
"We believe there is a very real danger that Britain's biggest housebuilder faces collapse when covenants are tested in February," Stewart warned.
There are growing signs of the slowdown affecting Scotland.
Robert Adair, executive chairman of Glasgow-based Terrace Hill, said its Scottish housebuilding division was not building homes unless it was "almost certain" it had a buyer lined up.
Last month Homes for Scotland warned that "several thousand" jobs were threatened by the slowdown.
The full article contains 446 words and appears in The Scotsman newspaper.
