UPDATE 3-Taylor Wimpey sees delay to financing deal

(Adds bond price in paragraph 9, updates shares)

By Simon Meads

LONDON, Oct 3 (Reuters) - Taylor Wimpey Plc (TW.L) announced a further delay in renegotiating its 1.7 billion pound ($3.0 billion) debt burden, raising concerns of a default on its eurobonds and sending its shares as much as 8.7 percent lower.

Britain's largest housebuilder by number of homes said that securing a "comprehensive financing structure" was essential in the current market conditions and that its banks have indicated their intention to agree a revised set of banking covenants.

"To that end the board has decided to extend the current discussions with debt providers to include applicable Eurobond holders, which will prolong the negotiation process," it said in a statement on Friday.

Taylor Wimpey has previously indicated it would breach its interest cover covenant by February unless it agrees a new financing package.

One analyst, who declined to be named, said should Taylor Wimpey breach its bank debt or its U.S. private placement debt conditions, bondholders could "cry default" and press for an early redemption of their 450 million pounds in bonds.

The analyst said the extension of the discussions brought the eurobond holders into the main arena and was "recognition of the presence of the threat".

Shares in Taylor Wimpey were down 1.45 percent at 34 pence at 1424 GMT, having earlier fallen as low as 31.5 pence.

The stock has lost 90 percent of its value over the last 12 months, with the group failing to agree a 500 million pound emergency fundraising package in July, which would have prevented a breach of its banking covenants.

Taylor Wimpey 2019 sterling bonds GB019322696= dropped about 5 points to 44 percent of face value, a bond trader said.

Ratings agency Fitch currently rates the company's bonds BB-, three notches below investment grade.

SQUEEZE ON BUILDERS

Housebuilders are being faced with the squeeze of falling house prices and the soaring cost of repaying their debt as pressure on the financial system continues to build.

UK house prices posted their largest monthly fall since 1991 in September, slipping 1.7 percent to leave them 12.4 percent lower than a year earlier, according to figures from building society Nationwide on Thursday.

Meanwhile, the cost of debt servicing has soared for rival housebuilders that have renegotiated their debt in recent weeks. Interest levels for both Barratt Developments (BDEV.L) and Redrow (RDW.L) increased some 2 percentage points to about 9.75 percent and 8.5 percent respectively.

Taylor Wimpey did not give any guidance on interest rates for refinancing its bank debt, however the market is currently pricing the running yields on the bonds at 13 percent.

"It's possible those are terms being set for the rest of the debt," the analyst said, indicating the company is likely to see a fee for renegotiating the debt that runs into the tens of millions of pounds. (Additional reporting by Natalie Harrison; Editing by Simon Jessop and Quentin Bryar)