Housebuilder Gladedale Heading For Auction

Gladedale, one of a glut of housebuilders which ran into financial trouble during the 2009 banking crisis, is being groomed for a sale amid a sharp upturn in the industry's fortunes.

I have learnt that Gladedale, which has a significant presence in both the residential and commercial property sectors, is in discussions with banks about the launch of a process to sell or float the company later this year.

The company is expected to appoint an adviser to help assemble an exit within the next six weeks, according to insiders.

Based in Dunfermline, Gladedale is part-owned by Lloyds Banking Group (LSE: LLOY.L - news) , the state-backed lender, having expanded rapidly to become one of the UK's 10 biggest housebuilders in 2006.

Lloyds owns roughly 30% of the ordinary shares in the company following a debt-for-equity swap struck in September 2009.

Under that deal, Lloyds, which had recently taken control of HBOS, the stricken mortgage lender, also acquired preference shares in Gladedale in exchange for writing off approximately £500m in debt.

Gladedale's flagship projects include the Quartermile development in Edinburgh.

Lloyds is understood to be supportive of the decision to launch a sale of the company, which is likely to generate a return for it of roughly £100m. Last year, the bank refinanced £455m of Gladedale's borrowing facilities, giving the company until next year to repay its loans.

The appointment of bankers to offload Gladedale follows the recent sale of Cala Homes and Countryside, two other housebuilders which became part-owned by Lloyds by virtue of its HBOS rescue.

The flurry of sales involving housebuilding groups backed by Lloyds underlines the extent to which HBOS became embroiled in excessive lending to the sector during the boom which preceded the financial crisis, a trend criticised in a recent report by the Parliamentary Commission on Banking Standards.

It also reflects the stark turnaround in the industry's fortunes in the wake of a string of Government policies aimed at stimulating housebuilding activity. In last month's Budget, George Osborne announced the launch of Help To Buy, a new scheme aimed at first-time buyers.

Cala (Other OTC: CCAA - news) , also headquartered in Scotland, was bought by a joint venture between Legal & General (LSE: LGEN.L - news) , the insurer, and Patron Capital, the private equity group, in a £210m deal.

Countryside sold a large stake to Oaktree Capital, another investment firm, in February, while Crest Nicholson, a larger rival, floated on the London stock exchange (LSE: LSE.L - news) earlier this year.

Assuming Lloyds successfully sells its stake in Gladedale, it would be the last remaining equity stake in a major housebuilder to be removed from the bank's books.

Lloyds declined to comment, while a spokesperson for Gladedale, which is run by former Redrow (LSE: RDW.L - news) boss Neil Fitzsimmons, said: "It is our policy not to comment on market rumour."