Barrat 'in funding lifeline deal'
Struggling housebuilder Barratt Developments is to strike a deal with its lenders to strengthen finances hit by the housing market downturn, it was reported today.
The company’s bankers – led by HSBC, Royal Bank of Scotland, Barclays and Lloyds TSB – have given initial approval for a refinancing deal, according to the Daily Telegraph.
Barratt is burdened by £1.7bn (€2.2bn) in debt which it used to buy rival Wilson Bowden last year at the top of the market.
But its shares have been hammered in recent months amid worries over its balance sheet and the prospects for the group as the housing market stalls.
The deal with the banks, reportedly negotiated by NM Rothschild and Deloitte, would see Barratt’s banking covenants on debt relaxed and also provide an extra £400m (€507m) in bank debt to pay off a £600m (€761m) short-term facility used in the Wilson Bowden deal, the Telegraph said.
Barratt, which declined to comment, saw its shares rise 10% following the report. It is thought that the firm could confirm details of the refinancing in its next trading update, due on July 10.
The impact of the credit crunch has been felt across the housebuilding sector as the would-be buyers have been deterred by the difficulty of gaining affordable mortgages and weakening confidence over the state of the economy.
Yesterday housebuilder Taylor Wimpey said it was in fundraising talks with investors to cope with a “significant downturn” in the housing market, with the group reportedly looking to raise £500m (€634m) to shore-up its finances.
Taylor Wimpey also revealed a total of £660m (€837m) in land-bank and work in progress writedowns. Analysts also fear hefty provisions from Barratt, although the firm said last month that the need for any write-downs in its current financial year, which ended yesterday, would be “limited”.
