Countrywide, the UK’s largest real-estate services group with over 10,000 employees in 900 locations, saw its shares plunge over 60% on Thursday after the company asked investors to pony up £140 million of emergency funds to save it from collapsing under the weight of its own debt. At one point the shares were down over 70%. On Friday they fell a further 14%.
In the last three months, the stock has crumbled 86%, from £1.10 a share in early May to £0.15 on Friday. The firm’s market cap has plunged to a paltry £37 million — little more than the average house price on Britain’s most expensive street, Kensington Palace Gardens in London.
The company, which owns 50 agency brands, including high street agency brands such as Hamptons International, Bairstow Eves and Bridgfords, attempted to raise £250 million in May by issuing bonds. If offered price the five-year notes at a yield of 8%, but potential investors said they would have to have at least 9%, according to the FT. The bond was supposed to pay off a revolving line of credit, and there would have been some left over to decorate the balance sheet with a little cash. But the effort was scuttled.
Now, it hopes to stave off collapse by raising £140 million — more than three times its current market cap — through a heavily discounted share placing and open offer later this month.
If successful, the cash will help reduce Countrywide’s net debt, which currently stands at £212 million, by around 60%. If it doesn’t raise the funds, Countrywide could become the first major victim of the UK’s stagnating housing market. The group’s auditor, PwC, warned that there was a “material uncertainty” about its future if the share issue failed…