February 12, 2013 11:09 pm

Crest Nicholson poised to relist

Crest Nicholson is set to return to the London Stock Exchange with a market capitalisation of £550m in a sign of renewed confidence in the housebuilding sector.

Stephen Stone, Crest’s chief executive, and Patrick Bergin, finance director, have spent the past fortnight meeting investors in the US, Germany and London. They have secured enough support to return to the FTSE 250 at around 220p a share – at the high end of the original 195p-230p range, sources said.

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If successful the initial public offering will bring to an end what has been a painful five years away from the stock market for the company.

Crest, which builds upmarket homes mainly in the south of England, became one of the highest profile victims of the financial crisis after being taken over by its lenders in 2009.

The deal has been closely watched in the City as it comes amid hopes of a revival in the IPO market after 2012 proved the worst year for deal activity since the financial crisis. McCarthy & Stone, the UK’s largest builder of retirement homes, is also expected to seek a stock market listing this year.

Crest, which builds upmarket homes mainly in the south of England, was among a clutch of housebuilders taken private during the housing boom and saddled with unsupportable debts. In 2009, it was brought under the auspices of its lenders after a debt-for-equity swap.

The group was taken private by a 50-50 venture between HBOS and Sir Tom Hunter, the Scottish entrepreneur, close to the peak of the property market in May 2007. In 2009, on the back of steadily falling house prices, it completed a £630m debt-for-equity swap that left its lenders holding 90 per cent of the stock, with the remaining 10 per cent going to the management.

Last year, the banks sold down their positions and Crest is now majority owned by distressed investment fund Varde, which has a 60 per cent stake. Deutsche Bank holds around 20 per cent.

The biggest winners from the float appear to be Varde, which has built up a 60 per cent stake, and Deutsche Bank, which holds about 20 per cent.

The listing will raise £50m for the company, which it plans to use to pay down debt, plus a further £150m from shares sold by institutional shareholders and management.

The offering follows a resurgence in profitability at Crest and other listed housebuilders including Barratt Developments, Bovis Homes and Taylor Wimpey. FTSE housebuilders’ shares have surged 42 per cent in the past six months, buoyed by government initiatives and the sales of homes built on land bought at distressed prices after the financial crisis.

Crest was taken private by a 50-50 venture between HBOS and Sir Tom Hunter, the Scottish entrepreneur, at the peak of the property market in May 2007.

In 2009, on the back of steadily falling house prices, it completed a £630m debt-for-equity swap that left its lenders holding 90 per cent of the stock, with the remaining 10 per cent going to the management.

The highly leveraged deal rapidly went sour as the housing market collapsed and Crest had to shed half its staff, significantly write down the value of its land bank and carry out two large debt restructurings.

Robin Hardy, analyst at Peel Hunt, advised the broker’s clients to subscribe to Crest’s IPO, saying that the company looked set to come to market on a valuation below that of its peers, despite a “differentiated business model, attractive operating profile and genuine expansive growth”.

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