Barratt close to financing deal

Permalink: Barratt close to financing deal
by Kay Murchie

Like many of its rivals, housebuilder Barratt Developments, has been affected by the slide in house prices and house sales and soaring mortgage rates.

As a result, the struggling housebuilder is close to securing a rescue refinancing with lenders that will relax its banking covenants and help it through the property slowdown.

As has been the case in the property industry, housebuilders have stopped building on some sites as they did not have the funds to complete them.

Investment bank NM Rothschild has been hired, as has a restructuring team from Deloitte to negotiate with its lenders. The deal has been preliminarily approved by its banking syndicate which comprises Barclays, HSBC, Lloyds TSB and Royal Bank of Scotland.

Currently, Barratt has a debt of £1.7 billion and has suffered a 95% decline in its share price in little more than a year.

However, the refinancing will be a coup for Barratt, which, unlike its rival Taylor Wimpey, has not had to ask shareholders for a bail-out.

Taylor Wimpey has reported significant write-downs and cut £660 million off its valuation for UK, US and Spanish property. It is close to receiving a huge cash injection of £550 million in a bid to shore up its balance sheet.

Other housebuilding giants Bovis Homes and Persimmon have announced warnings lately and the latter recently confirmed that it is to stop building on new sites until market conditions improve, which could result in tens of thousands of job losses.

Demand for rented accommodation continues to rise as a growing number of people are choosing to rent instead of buying a home while they wait to see what happens in the property market.

It is expected that Barratts will confirm full details of the size and the price of the issue at its trading update tomorrow.