BRITAIN’s biggest housebuilder will strike a compromise deal with banks this week to buy it breathing space to renegotiate its £1.9 billion debt mountain.

Bankers for Taylor Wimpey are expected to postpone a crucial covenant test on its loans to give the builder more time to restructure its finances.

The embattled company was due to breach an end-of-year covenant test on its loans following a savage downturn in the housing market.

It is expected that Taylor Wimpey will be forced to update the London Stock Exchange this week on the progress of the negotiations.

Shares in the builder began to rise last week after a leaked e-mail from Peter Redfern, its chief executive, was circulated in the City. The memo told staff the company had enjoyed very productive negotiations with its banks, increasing his confidence that an acceptable solution could be reached.

It is thought that Taylor Wimpey will be forced to offer its lenders an equity sweetener – most likely a single-digit stake in the business – as part of any refinancing deal.

The banks are expected to charge the company much higher interest rates in exchange for waiving the existing lending agreement.

Taylor Wimpey’s shares have been hammered during the past year amid the housing slowdown and it will be ejected from the FTSE 250 tomorrow as part of the latest reshuffle.

The shares closed up 10.9% on Friday at 12Çp, valuing the company at £134.6m.

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