HBOS must inject about £100m of fresh cash into Crest Nicholson in the coming weeks to prevent the housebuilder from breaching banking covenants.
If HBOS, which owns 50% of Crest Nicholson, decides that it is unwilling to support the builder, its investment could be wiped out and the lending banks could step in and take control.
HBOS is also understood to be contemplating bringing in a partner to provide the funding. Hedge funds and private-equity groups are thought to be interested. HBOS has hired debt specialists at Deloitte to assist with the negotiations.
Crest Nicholson, led by chief executive Stephen Stone, was bought in 2007 at the height of the housing boom by Uberior Investments, the private-equity arm of HBOS, and West Coast Capital, the private-equity vehicle of the Scottish retail tycoon Sir Tom Hunter.
Sunday Times, The Times