McCarthy&Stone in debt talks with banks

By Elena Moya and Tessa Walsh

LONDON (Reuters) - McCarthy & Stone, the largest retirement homes builder, is talks with its lenders over re-negotiating its bank debt, as its loans plunged in value this week amid the worsening housing sector.

Talks with the lenders are in the "early days," a source close to the matter told Reuters on Friday, adding that a conversion of debt into equity -- which would give creditors ownership of the company -- was not being discussed.

McCarthy & Stone, owned by HBOS HBOS.L, West Coast Capital and financiers David and Simon Reuben, is struggling as house prices have lost 11 percent of their value in one year. The company has about 800 million pounds of debt, according to a media report.

McCarthy & Stone's loan posted the biggest drop in the European secondary market this week, according to RLPC data, as the company's Term loan B and Term loan C lost 23 percent to settle at 51.5 percent of their face value.

Average bids on Europe's top 40 leveraged loans currently stand at 87.5 percent of face value, after losing 2.5 percent in a difficult July, the data shows.

Company officials were not immediately available for comment. The company is being advised by Rothschild, the investment bank also advising Taylor Wimpey (TW.L).