Varde in deal to take Crest Nicholson on

HOUSING firm Crest Nicholson will be taken over by a US distressed debt specialist within the next few weeks, a source close to the firm confirmed yesterday.

Minneapolis-based Varde Partners has been working for months with advisers Lazard and Bingham McCutchen to assess the options for the firm, which became 90 per cent owned by its lenders following a £648m debt for equity swap in January 2009.

After buying up more than 80 per cent of Crest’s debts from Lloyds Banking Group and others over the course of a year, Varde is expected to complete a debt for equity swap with the remaining lenders by the end of August.

The housebuilder said in May that it expected £359m of its £551m face-value debt pile to be converted into equity at some stage, and that its directors were working with Varde to try and deleverage the business.

Crest Nicholson was taken private by HBOS and Sir Tom Hunter’s West Coast Capital in May 2007 and undertook a previous debt for equity swap in early 2009.

Lloyds ended up with a 30 per cent equity stake in the firm and around a quarter of its debt when it acquired HBOS in 2009, and sold the holding to Varde last October for an undisclosed amount.

The company, which focuses on building properties in the south east and the Midlands, was hit particularly hard by the recession and associated funding problems suffered across the real estate sector.

But Crest Nicholson reported an operating profit of £47.3m for the year to October, marking a turning point after a turbulent few years in its main markets. The group posted a pre-tax loss of £27.4m thanks to one-off charges.

The company is sitting on a landbank worth more than £6.3bn and said in its annual report in April that it had booked future house sales worth £99.1m.

Bringing the firm’s debts and assets together under a single owner is understood to be part of the Crest Nicholson board and Varde’s joint turnaround plan.

Crest Nicholson declined to comment yesterday, while Varde did not respond to requests for comment.

MEET THE BIDDER: VARDE PARTNERS

GEORGE HICKS
MANAGING PARTNER AT VARDE
VARDE Partners, a privately held investment manager based in Minnesota, is not a name that crops up often in London company announcements.

Working for what it calls a “select group of sophisticated investors”, Varde has invested from offices in Minneapolis, London and Singapore since 1993. In February, Varde was one of the funds involved in a $290m stalking horse bid for video chain Blockbuster after it filed for Chapter 11 bankruptcy, though it later lost the auction.

The group has also been linked to Irish Life & Permanent, with reports in June suggesting that Varde was interested in bidding for the nationalised firm’s banking arm.

The firm has seven partners, with qualified lawyer George Hicks acting as joint managing partner alongside co-founder Marcia Page, Jeremy Hedberg and Jason Spaeth.

Rick Noel oversees the group’s London office and all investing activities in Europe and Asia, and is one of several partners who previously worked for Minnetonka-based agricultural conglomerate Cargill.

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