McCarthy & Stone strikes debt deal

McCarthy and StoneMcCarthy & Stone, the UK's biggest retirement home builder, is poised to announce that it has secured a £527 million refinancing to secure its future.

The developer had been saddled with debts after an ill-fated £1.1 billion deal to take it private in 2006 - before the property market crashed.

Its fortunes have since improved but it was still left with a £500 million hole in its finances that needed to be addressed by April next year.

The group is now set to confirm that 24 investors, led by six shareholders including Goldman Sachs, Strategic Value Partners and TPG, have injected £367 million of new equity into the group.
They have also agreed to provide a five-year, £160 million loan in a transaction that reduces the company's debt by £350 million, it was reported.

Chief executive Mark Elliott said that repaying the debt nine months ahead of the April deadline meant the company could focus on developing the business.

He told The Times: "The refinancing ends a period of uncertainty that the company has had since 2006 when it was taken private with a significant debt burden.

"We now have the support of a fantastic group of shareholders who are confident in this business and want to support its growth."

He said the business could now drive ahead with plans to invest £1.5 billion by buying a further 250 sites by 2018.

"The business is hugely cash-generative, we have an increasing pipeline of new developments coming through and there is good steady growth in demand for the product," Mr Elliott said.

McCarthy & Stone was taken private in an ill-fated deal led by Scottish entrepreneur Sir Tom Hunter and billionaire brothers David and Simon Reuben in 2006.

A debt-for-equity swap three years later left the group 25% owned by its lender, Lloyds Banking Group.

The Bournemouth-based group, which sold almost 1,400 properties last year, was founded by John McCarthy and Bill Stone in 1963 and began specialising in building retirement homes in the 1970s.

It employs around 700 people and has developed homes for some 45,000 retired residents.

Latest annual results, to the end of August last year, showed underlying earnings rose 10% to a five-year high of £39.9 million after sales jumped 12% to £257.7 million.

The refinancing deal comes amid a buoyant period for the property market, with Bovis and Persimmon this week both announcing soaring earnings figures.