Eyes on Taylor Wimpey as industry wrestles debt

LONDON Jan 12 (Reuters) - Investors will scour Taylor Wimpey's (TW.L) trading update on Tuesday for news on talks with its lenders, as the outlook for the United Kingdom's top home builders remains bleak in the moribund credit markets.

The UK's largest housebuilder by number of homes built has been in talks about its 1.9 billion pound ($2.90 billion) debt pile for several months.

There is widespread speculation that creditors will end up owning a stake in Taylor Wimpey. Indications are that it will take until around March -- the deadline for it to complete refinancing talks -- for a deal to come through.

The Financial Times reported last week that the company had made the first steps towards a deal with its banks and senior creditors, agreeing that it would pay higher interest, though it added that more work was needed to reach a final deal.

Last month, the group agreed to defer the testing date of its financial covenants, saying it would likely have breached a covenant test without the delay.

Taylor Wimpey is not alone. Bovis Homes (BVS.L) and Persimmon (PSN.L) -- two other debt-ridden builders -- last week detailed new measures with their banks as a slump in mortgages hurts demand for new developments and financing costs rise.

"Many housebuilders did not have time to reduce their own debt positions, and banks' reluctance to lend now means their customers are struggling to get hold of mortgages," KBC Peel Hunt analyst Robin Hardy said.

Analysts at Royal Bank of Scotland have estimated that British housebuilders have a net debt totalling 4.7 billion pounds.

British house prices fell 15.9 percent in 2008, making it the worst year on record, according to figures published this week by the Nationwide Building Society.

NO FREE LUNCH

Some builders have already won over banks with lender-friendly measures such as higher interest rates, asset sales and refocusing on cash conservation measures, but such deals can come at a hefty cost.

Bovis Homes (BVS.L) on Friday detailed the cost of refinancing its debts. The company said it paid 8 million pounds in arrangement fees to agree on new 220 million pound debt facilities, which it signed at the end of December. It also will pay higher interest rates -- of about 6 percent -- on the debt.

Persimmon said on Thursday it was talking with lenders to refinance its credit facilities, though analysts said there might be complications down the road.

Banking sources have told Reuters LPC that Persimmon is close to an agreeing on its refinancing and the deal was likely to be structured as a forward start agreement, in which lenders replace existing loans in return for higher margins and fat fees.

Lenders to privately-held housebuilder Crest Nicholson are expected shortly to end up with substantial equity stakes in the firm after a 715 million pound 2007 buyout turned sour.

Of the remaining major players, Barratt Developments (BDEV.L) and Redrow (RDW.L) both reached agreement with lenders last year, securing terms that now look advantageous compared with more recent refinancing agreements.

Berkeley Group BKG_u.L has only limited debts while Bellway (BWY.L) has no short-term refinancing needs. ($1=.6561 Pound) (Editing by Douwe Miedema and Karen Foster)