Tonight:
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What is going on at Taylor Wimpey, the UK's largest housebuilder? Little more than two weeks ago, chief executive Pete Redfearn dropped a heavy hint that he would be putting together a £350 million rights issue.
The company certainly needs the cash. At the last count, TW's balance sheet was weighed-down with debts of more than £1.5 billion — three times more than its current stock market price tag.
But today the shares firmed ½p to 47¼p as rumours swirled around the Square Mile that it would announce within the next few days a one-for-five rights issue at 25p. But that would only raise £100 million and still leave a gaping a hole in the balance sheet.
Redfearn told brokers earlier this month that the group's recently renegotiated £2.5 billion refinancing package was not dependent on raising new equity, although that would be desirable and something the company was certainly looking at. Such a move would lead to savings of £83 million annually.
The group also has the option of cutting the cost of the facility if it reduced it by £150 million by June, and raised £350 million by June next year.
Shares generally looked to be ending an eventful week on a solid note with stock market bears continuing to be squeezed. Investors appeared unfazed by news of the worse-than-expected slowdown in the recession-hit UK economy during the first quarter. The FTSE 100 index rose 100.39 to 4118.62.
Once again, all eyes turned to Wall Street where a clutch of blue-chip companies came in with positive first-quarter numbers.
The results from Ford exceeded expectations as did computer giant Honeywell, while oil industry services giant Schlumberger exceeded analysts' lowered expectations. The Dow rose 67.54 at 8024.6.
Back in London, the miners led the way, cheered by some bullish comments on the sector from Cazenove which has raised its rating from neutral to overweight.
It says recovery “noise” is increasing almost daily with the robust Chinese economy expected to “prop-up” commodity prices. Xstrata responded with a rise of 75p to 600p.
It was accompanied by Kazakhmys, up 40p at 516½p and Eurasian Natural Resources, 39½p better at 590p.
Banks ticked up: Barclays added 9.5p at 226¾p after the successful conclusion to yesterday's AGM and Lloyds Banking Group was 4.3p dearer at 100.3p.
There was some big turnover in Vodafone with 180 million shares changing hands as the price fell 2.25p to 120.4p. Debenhams was the best performer among second liners with the price up a further 6¾p at 84p — for a two-day gain of 21½p as more brokers upped their ratings on the department store operator in the belief it has turned the corner.
Nomura has raised its rating from reduce to buy, lifted its target price by 39p to 90p, and says that even adjusting for a potential fund-raising exercise the shares look inexpensive.
Deutsche Bank has moved from hold to buy while Citigroup has jacked up its target from 75p to 100p and Altium from 66p to 79p.
Nomura says: “We believe the group deserves recognition for its strong operating performance and plans for further improvement. Current trade is well ahead of forecast and both like-for-like sales and gross margins look well supported.”
Debenhams has certainly enjoyed a good 2009, so far. Its shares started the year at a low of 23½p and have since more than trebled. But at the last count, the group still had more than £900 million worth of debt which had led to the payout to shareholders being cut.
Rupert Armitage at Shore Capital says: “Debenhams has got its act together but it's at the expense of the likes of Next and Marks & Spencer.”
He reckons that with the shares at this level, Debenhams can now concentrate on reducing debt, the best bet being a two-for-one rights issue.
It is a view echoed by SocGen which concludes a rights issue remains likely.
It has raised its target from 32p to 81p. Marks & Spencer was 1¼p cheaper at 338¾p, and Next added 52p at 1581p.
