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Crest Nicholson, the house-builder taken private last year by HBOS and Scottish tycoon Sir Tom Hunter, has conceded that it could breach its banking covenants if the housing market continues to deteriorate.

In Crest's first set of accounts since de-listing from the stock exchange, which it filed last week, the company warned that its financial structure was highly leveraged.

'Financial forecasts, which take account of current market conditions, do not show any breaches of financial covenants,' Crest said.

'However, if the 2008 housing market proves to be significantly weaker than we expect, there is a risk that financial covenants will be breached. Contingency plans are in place to mitigate this risk.'

Although there has been speculation about the group's financial health, it is the first time it has formally stated there is a chance this could happen. The accounts also show the house-builder made a pre-tax loss of £10.1m in the 12 months to 31 October 2007. 'Finance expenses', including interest on loans, totalled £72.5m over the period.

But trading had remained strong last year, the company stated. Underlying pre-tax profits were £102.8m, up from £100m in 2006, and total housing completions rose by 11 per cent to 2,225. The average sale price was just under £198,000, down fractionally from the average of £199,000 recorded in 2006.

Article continues at Guardian Property

Labels: Crest Nicholson, Housebuilders, Housing market, HSBOS, property development, Sir Tom Hunter, Taylor Wimpey, uk housing

The high-street bank HBOS must inject about £100m of fresh cash into Crest Nicholson in the coming weeks to prevent the housebuilder from breaching banking covenants.

If HBOS, which owns 50% of Crest Nicholson, decides that it is unwilling to support the builder, its investment could be wiped out and the lending banks could step in and take control.

HBOS is also understood to be contemplating bringing in a partner to provide the funding. Hedge funds and private-equity groups are thought to be interested. HBOS has hired debt specialists at Deloitte to assist with the negotiations.

Crest Nicholson, led by chief executive Stephen Stone, was bought in 2007 at the height of the housing boom by Uberior Investments, the private-equity arm of HBOS, and West Coast Capital, the private-equity vehicle of the Scottish retail tycoon Sir Tom Hunter. Their joint venture valued the business at £715m. Hunter is the richest man in Scotland, according to the Sunday Times Rich List.

Article continues at Times Online

Labels: Crest Nicholson, Deloitte, House market, Housebuilders, HSBOS, property analysis