Foxtons, the estate agency that brought 'bling' to the property market, is not in danger of collapsing, nor will it be sold, its owners insist.
'Owners are fully committed'
Newspapers have widely reported in recent days that Foxtons is in breach of its banking covenants and needs an urgent injection of £50m in cash to survive. But a spokesman for its owners, BC Partners, insisted that newspaper correspondents had misinterpreted a briefing given by the private equity firm.
"It was made very clear that BC Partners would certainly be prepared and willing to put more capital into Foxtons," says a spokesman for BC Partners.
However, there is no attempt to deny the fact that BC Partners paid too much when it bought Foxtons for about £360m – using £260m of debt – at the height of the property market. It is today valued by its owners at only £50m or so &ndash representing now a mere 1% of its owner's assets.
'Decline was not anticipated'
"Obviously [BC Partners] had not anticipated the extent of the decline," says the spokesman. He adds that Foxtons remains profitable, not least because half of its business concentrates on accommodation letting, where the market remains strong, rather than just on property sales.
"We made the wrong call," newspapers reported Andrew Newington, BC Partners' managing partner, saying at the recent press conference. He was also reported to have said that Foxtons had failed to meet its trading targets.
While BC Partners has stressed its willingness to invest more capital in Foxtons, it remains clear that there are difficulties in meeting debt repayments. Its lenders are Mizuho and Bank of America and it is reported that they have told BC Partners that they must put up an extra £50m. BC Partners dismisses suggestions that Foxtons is in crisis.
Private equity under pressure
However, BC Partners is under pressure itself at present – as is most of the private equity sector. Private equity firms have typically borrowed heavily in recent years and are now being pushed by lenders to repay debt. In many cases, loan facilities are not being renewed when they come to the end of their terms, conditions are being strengthened and tough action is being threatened when private equity firms and their portfolio companies breach covenants.
Another of BC Partners' portfolio companies is Fitness First, which is vulnerable to the economic downturn and has closed some of its gyms in recent months. BC Partners is backed by a number of pension funds and institutional investors, including some in North America and Asia.
The private equity firm has also just announced that its long-serving chairman Jens Reidel has stepped down, replaced by joint chairmen, Raymond Svider, operating from New York, and Francesco Loredan, who is based in Geneva.
Moving billboards
Foxtons has been known for its glitzy approach to selling homes, using vivid minis decked in the company's logo acting as 'moving billboards' – as the company describes them – for its agents. It has also made over its showrooms so that they look like cafes.
The agency was established in Notting Hill in 1981 by Jon Hunt. When he sold the company in 2007, some media commentators suggested that Hunt realised the game was up for a while for the estate agency business. In retrospect, the timing looks to have been superb.