Fitch upgrades Taylor Wimpey

Fitch Ratings said it upgraded Taylor Wimpey plc's long-term issuer default rating to B- from CCC and short-term issuer default rating to B from C and revised the recovery rating on its senior unsecured obligations down to RR5 from RR4.

The CCC senior unsecured debt rating and the long-term issuer default rating remain on Rating Watch positive.

The rating actions follow the announcement by the company of a fully underwritten share issue that could raise an estimated £510 million. The agency said this proposed share issue is expected to have a positive impact on the company's credit profile given that the net proceeds will be used to reduce gross debt. In turn, Fitch expects this to improve the pro forma net debt-to-EBITDA ratio to 4.9 times as of Dec. 31 from 7.4 times.

The revised recovery rating reflects concerns about structural subordination. Following Taylor Wimpey's recent debt amendments, the agency now believes that £416 million of undrawn secured committed debt facilities and £1.18 billion of pensions liabilities effectively rank ahead of the company's senior unsecured obligations.

The ratings that remain on Rating Watch positive could be upgraded further once Fitch has had the opportunity to conduct a full review of the company's new financing structure, operational strategy and forecasts.

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