NM Rothschild called in to save estate agent Foxtons
THE private-equity owner of estate agent Foxtons has appointed the investment bank NM Rothschild to review the business just one year after buying the company.
Best known for its branded Minis and aggressive sales tactics, Foxtons was bought by the private-equity group BC Partners for £390m in May 2007 at the height of the buyout boom.
Foxtons founder Jon Hunt walked away from the deal with more than £360m.
The review will most likely include a restructuring of the highly leveraged deal. It is understood the Foxtons board is meeting with the investment bank this week to discuss how it wishes to proceed.
This comes just days after HBOS announced plans to close more than a quarter of its Halifax estate agencies. The share prices of listed rivals have also been hit hard. Savills has plummeted by more than 50% since last September and Humberts, one of Britain’s oldest firms, fell into administration earlier this summer.
BC Partners funded the Foxtons deal with about £260m of debt provided by Bank of America and Mizuho of Japan, leaving Foxtons with annual debt interest payments of £26m.
In July it was reported that Foxtons was trading significantly below its performance targets but the company said it was still able to meet its interest payments.
It was also reported that 60 staff were axed in February though Foxtons insists they left voluntarily. None of its 22 branches based in prime London locations has been closed.
On top of interest repayments, the group has banking covenants or quarterly targets to hit, which measure its turnover in relation to its debt.
With housing sales at a virtual standstill the covenants are under pressure and Foxtons is now reliant on the support of its banks, which were unexpectedly stuck with all of the buyout debt after they failed to syndicate it or sell it on to a third party.
Foxtons said it is “confident” it will not breach any of its loan covenants but the banks are said to be watching the situation carefully.
If Foxtons fails to meet its obligations, BC Partners could inject more equity or the banks could take control.
No British bank lent to Foxtons, although several were invited to do so - including Barclays, HBOS and Royal Bank of Scotland, which are all active in the UK mortgage market. Hunt indicated he has no intention of buying back the business.
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