Crest Nicholson Considers New Floatation

on Sep 25, 2012

A new flotation has begun to bake in the UK with Crest Nicholson planning to return to the stock market after a five-year absence. According to The Times, the housebuilding company has approached Barclays and HSBC as well as Peel Hunt and Numis Securities to advise it on its listing options.

Crest Nicholson went private at the peak of the property bubble in 2007, when it was bought out by entrepreneur Sir Tom Hunter and HBOS. At the time shareholders praised Mr Hunter for his negotiating skills in striking the £1.2 billion take-private deal with HBOS at two times the book value and only two months before the market crash.
From then on things didn’t go so well for Crest with property prices crashing and the housebuilder turning into one of the many firms struggling to meet their financial obligations. Only a year later HBOS, the partial owner of the construction company, had to be rescued by Lloyds in a toxic deal, which cost taxpayers £20 billion in bailout money.

!m[](/uploads/story/450/thumbs/pic1_inline.png)In order to unwind the £1.2 billion debt from the takeover, Crest carried out a £630 million debt-for-equity swap and became the property of 24 lending banks. In 2011, Värde Partners, an American hedge fund, bought large swathes of the housebuilder’s debt and seized control of the company.
Since then the hedge fund has done its best to restructure the business, cut costs and improve the return on capital. Crest registered a profit of £16 million in the second quarter of 2012 compared to the 2011 loss of £21.5 million. “Like all the listed housebuilders, Crest is doing well. Its profits have recovered more quickly than the others as it wrote down land during the housing crash straight away, and it has a strong bias towards the South East” said Liberum Capital’s analyst Charlie Campbell as quoted by the Financial Times.

Crest Nicholson is expected to be valued at around £500 million, which would catapult it straight back into the FTSE 250. According to Mr Campbell the time is good for flotation with the government having taken steps to stimulate the construction sector and new home builds in particular. ‘It’s quite an opportune time to float. Profits have gone up and there is enthusiasm for these stocks, with shares in housebuilders up 45 per cent.’

According to Construction News, Crest Nicholson and the Homes and Communities Agency have launched a £200 million home development in Milton Keynes. The detailed planning for the project, meant to build some 231 dwellings and a new district centre, was approved in March 2012. The first premises on the project will be available for viewing in November, while the neighbourhood centre is expected to open in spring 2013. Crest’s executive board director Chris Tinker said the company was “delighted to be commencing the delivery of this landmark and much anticipated development at such a crucial time in the economic cycle”.
According to the FT, the new floatation plans are indicative of the improvement in the housebuilders’ fortune. Shares in the sector are up 48 percent since the beginning of the year compared with 6 percent for the FTSE, as UK housebuilders managed to increase margins by selling homes built on cheaply bought land during the recession.


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