Countrywide, the UK’s biggest estate agent, is planning to ask investors for more than £100 million to help it survive the huge changes taking place in the housing market.
The company, which owns the chains Hamptons and Bairstow Eves, as well as dozens of other high street estate agents, is planning a placing or rights issue to help tackle its debts and the fierce competition posed by online rivals, the Telegraph said.
The funds will be used to bankroll an attempt to revive Countrywide and cut its debt burden of about £200 million by at least half.
It is thought Countrywide will go to the market by Thursday, although the timetable could change.
The decision to seek a lifeline from shareholders comes after plans to raise a bond to replace a revolving credit facility with its current lenders proved unsuccessful, sources told the newspaper.
Jefferies has been appointed to oversee the fundraising, while the investment bank Rothschild will handle a potential restructuring if the cash call falls flat.
Countrywide’s largest investor Oaktree Capital, which owns just over 30% of the business, is understood to be supportive of the fundraising.
The estate agent, whose shares have fallen by 71% in the past year, leaving it with a market cap of just £116 million, will announce the fundraising alongside its interim results this week. Cash earnings are expected to plummet by 72% to £8 million.
Countrywide, which has 850 branches across the UK, has had a torrid few years, largely because it has failed to compete with the lower fee model offered by online rivals like Purplebricks and Yopa.
There has also been a decline in house prices and sales, particularly in Countrywide’s core South East market, thanks to interest rate fears, sluggish wage growth and concerns around Brexit.
Earlier this month, Countrywide posted its second profit warning of the year after experiencing a subdued property market and a sales pipeline significantly below that of 2017. This wiped more than £50 million off Countrywide’s stock market value.
Its chairman Peter Long announced a “back to basics” recovery plan in March, which included cutting head office staff numbers by a third – the equivalent of 150 jobs.
He has also called for senior branch staff who left during former CEO Alison Platt’s leadership to come back.
Many people in the market think the company could be ripe for takeover, with firms like Emoov, the online estate agent, recently making a merger bid. Emoov founder Russell Quirk argued Countrywide “is on its knees” and has “to do something”.
It doesn’t help that the firm is still without a permanent CEO, after Alison Platt quit her role in January, just a week after the company issued another profit warning. Long said Countrywide had lost its way in sales and lettings and that Platt “did the honourable thing and decided to step aside.”
He added that the organisational changes made by Countrywide, along with the cooling property market, led to it losing market share to other traditional competitors.
DMZ thinks it is sad to see such a property giant slowly declining, but it didn’t happen overnight. The firm has failed to evolve with the times and has suffered from severe mismanagement. The chances of a business turnaround are looking lower day by day.