Foxtons may strike deal with lenders - sources

LONDON, Aug 28 (Reuters) - Troubled British real estate agent Foxtons may be forced to strike a deal with its lenders to survive the protracted downfall of the UK housing market, sources with direct knowledge of the situation said.

Foxtons, which operates 22 branches mostly in London, recently appointed Rothschild ROT.UL as advisors, while Close Brothers (CBRO.L) will act for its lenders, Bank of America (BAC.N) and Mizuho Financial Group Inc (8411.T), the sources said.

"Deterioration in trading has been massive over the past two or three months," one of the sources said, referring to the real estate agent, owned by private equity firm BC Partners.

Bank of America and Mizuho hold most of the company's 260 million pound ($477.9 million) debt, after failing to syndicate the loan following the buyout, when the credit crisis hit debt markets and investors became more wary of leveraged deals such as Foxtons.

Industry rivals, including Savills (SVS.L), are also suffering from the downturn in the British real estate market.

British house prices fell almost 2 percent on the month in August to post their biggest annual drop since monthly records began in 1991, the Nationwide building society said on Thursday.

Foxtons is likely to start cutting costs, although liquidity is not a short-term issue, one of the sources said.

Founded in 1981 by Jon Hunt with a branch in Notting Hill, Foxtons generated revenues of 100 million pounds in 2006. It employs over 1,000 people and is well known for its colourful Minis that drive around London.

BC Partners, like other private equity firms, may be forced to plough more equity into some of its struggling investments. The firm also owns Baxi, a UK heating products maker, which recently also held talks with its creditors.

BC Partners officials were not immediately available for comment. Bank of America, Mizuho, Rothschild and Close Brothers all declined to comment.