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At 5pm on Thursday 19 March, Stephen Stone walked out of London鈥檚 High Court and hailed a cab to a bar. The legal papers ensuring his company鈥檚 survival had been signed moments before and the 55-year-old Crest Nicholson chief executive was in the mood to celebrate with his top managers.

Stephen Stone

And with good reason. The hearing marked the end of a gruelling 10-month process during which the UK housing market collapsed and the global banking system broke down. With half of Crest in the hands of HBOS for much of that period, Stone had been at the eye of both storms.

Today, bronzed and buoyant, there is no sign of the man who lost sleep worrying about the future of his business. As he breaks his silence on the events of the past year, he can even joke about the experience, comparing his struggle to save Crest with the heartbreak of supporting West Ham.

But behind the lightheartedness is the steely composure of a man who has just survived the worst year of his professional life. Suffice to say, nothing a journalist could throw at him could be worse. So, what is it like being caught up in the biggest global financial meltdown in history?

Off a cliff

Stone recalls the moment it dawned on him how serious the situation was: 鈥淟ate January is normally when the housing market gets going, but it didn鈥檛,鈥� he says in his measured east London drawl. 鈥淏y the end of February 2008 conditions were worsening quickly. It was then that we said to shareholders, 鈥榃e have some issues here鈥�.鈥�

But that was only the beginning. 鈥淚n April, the market fell off a cliff,鈥� he adds, with a downwards chopping motion. Crest was in no shape to withstand the storm. In March 2007, HBOS and entrepreneur Sir Tom Hunter had bought the company for 拢1.05bn. Each had put in 拢50m of equity, but the 拢950m they鈥檇 borrowed to fund the deal became its Achilles鈥� heel when the credit crunch hit. Stone quickly realised the debt was, in financial speak, unserviceable.

His team began examining whether fresh investment from HBOS, Hunter, or private equity was tenable, alongside the possibility of a debt-for-equity swap. But it soon became apparent that getting new money from anywhere was a non-starter. 鈥淭here was turmoil in the credit markets, so the idea of investment was just talk,鈥� says Stone.

Fearing the worst

By autumn, lenders had settled on the debt-for-equity solution. Then, cruelly, the worldwide banking system seized up. Lloyds announced the takeover of HBOS in September and Stone had his first serious doubts over Crest鈥檚 survival.

鈥淭he banks reassured us as much as they could, but that didn鈥檛 stop you fearing the worst,鈥� he says. 鈥淭he thought occurred to me time and again that it would be tragic for a good company to fail because of a debt structure imposed at the height of the boom.鈥�

Crest was dealing with a committee of six representatives from the main banks that had funded the deal, who Stone says 鈥渂arely flinched鈥� at the wider turmoil in the sector.

He says: 鈥淲e were very open with the banks from the outset about our figures, but you can鈥檛 help thinking what a small piece of the puzzle you are when you read headlines talking about the trillions that were pumped into the economy by governments.鈥�

The deal meant 拢630m of Crest鈥檚 拢1.1bn debt was swapped for equity and Hunter and HBOS lost their 拢50m stakes. HBOS, now part of Lloyds Banking Group, reportedly provided about 25% of the debt, so now has an equivalent stake. The company is 90% owned by 36 banks, and the remaining 10% is held by seven executive directors.

Not that Crest was the only housebuilder in trouble. Barratt was refinanced last summer and Taylor Wimpey recently completed a byzantine deal with its lenders. 鈥淚t was oddly comforting to recognise others were in the same boat,鈥� says Stone. Another consolation was that as Crest is a private company, its battle for survival was not played out blow-for-blow in front of the City.

Stone is open about what it was like sitting under the shadow of the guillotine month after month: 鈥淏loody awful. The worst part was the redundancies. It was a different type of stress from day-to-day concerns because you鈥檙e thinking 鈥榳ill we survive?鈥� and 鈥榳hat are we doing to our people?鈥欌��

I was waking up at three in the morning. I had that horrible tossing and turning when you鈥檙e fighting it and trying to get back to sleep

Stephen Stone

Stone, who is an architect by training, says that he always put on a strong front no matter what he felt like inside. 鈥淚t was grim, but you have to portray a robust exterior to staff and the people you negotiate with,鈥� he says. 鈥淚 made sure I spent time chatting to the receptionist and that I was seen smiling.鈥�

But the stress did get to him. 鈥淚 was waking up at three in the morning. I had that horrible tossing and turning when you鈥檙e fighting it and trying to get back to sleep.鈥� When asked whether it was also the worst year of his personal life, he says: 鈥淣o. It doesn鈥檛 compare to when Steven Gerrard scored in the last minute of the FA Cup final against West Ham in 2006.鈥�

Recovery

After weeks of sleepless nights, Stone鈥檚 worst fears were dispelled when an outline deal was struck by Christmas 2008. It took until March to go through the courts.

With HBOS now eaten by Lloyds and Peter Cummings, the controversial head of corporate banking, gone (see box), Stone says it feels like Crest is starting afresh. But despite the new start and the optimism that goes with it, its battle scars are clear to see. It employs 240 staff compared with 480 a year ago and in 2009 the 拢544m-turnover firm will build 1,900 homes; during the boom, it built 3,270.

Asked how he steered his company through such difficult times, Stone looks back on lessons learned in previous recessions. In particular, he drew inspiration from his days as development director under Alan Cherry at Countryside in the slump of the early nineties. 鈥淚 remember sitting in the boardroom when he asked us to work a six-day week. He said: 鈥榊ou all think you鈥檙e so great, go out and sell a house鈥�. He also taught me not to ignore warning signs. 鈥業f the market is falling, take a sale鈥�, was a classic Cherry-ism.鈥�

The future

Stone is now focusing his energy on growing Crest again, and as the apartment market has dried up, he is seeking to shift the company鈥檚 emphasis onto lower density schemes. Three bank representatives sit on the board and he says some are still learning the business. 鈥淓veryone lives in a house, so they think they understand the housing sector,鈥� he says.

But he predicts that the recovery won鈥檛 happen until at least the middle of 2010. 鈥淲e鈥檝e only just entered this recession,鈥� he says, pointing to the likely impact of rising unemployment. 鈥淧lus finance is a big issue. It previously came from the likes of RBS, HBOS and the Irish and European banks. I鈥檓 not convinced they鈥檒l be back into commercial lending in the foreseeable future.鈥�

Either way, he is convinced that the industry won鈥檛 get back to building 170,000 homes a year any time soon, saying that there will need to be 鈥渁 lot of de-mothballing and re-recruitment first鈥�.

He is upbeat about the government鈥檚 announcement in the Budget that it would pump 拢600m into the sector, but would like to see a stamp duty holiday on sales of less than 拢175,000 extended to all properties.

He is less enthusiastic about the government鈥檚 approach to planning. 鈥淪ection 106 agreements have been used to fund infrastructure, but viability is challenged when land values fall. With a raft of regulatory burdens, you need a flexible and open arrangement with councils. You also need additional grants from the Homes and Communities Agency to fund schemes.鈥�

Stone also bangs the drum for institutional funds to move into the private rental market. 鈥淲hat better time to tap funds to invest in private rented accommodation? Funds invest in shopping centres because they produce yields. That model has always been missing from the housing market, mainly because the small buy-to-let market was so vibrant there was no need. That鈥檚 not the case now.鈥�

He is less forthcoming about the banks鈥� exit routes at Crest, however, and says it is too early to think about the obvious choices of flotation or private equity sale. Private equity firms are known to be bargain hunting in the sector, but he only offers a knowing smile and a 鈥渘o comment鈥� on whether any have been in touch.

What he does reveal is that two months after that celebratory evening in London, he still doesn鈥檛 remember much about it. 鈥淲e all got absolutely hammered,鈥� he says. 鈥淭he next thing I remember is the taxi driver waking me up to tell me I was home. I won鈥檛 tell you what time it was.鈥� You can bet he slept well, though.