Barratt confirms £720m fundraising issue

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by Kay Murchie

Housebuilder Barratt Developments has today confirmed it is to raise £720.5 million through a placing and rights issue in order to strengthen its balance sheet and slash debt.

The rights issue is over £200 million more than the company was expected to raise after it has previously said it would not look to raise funds until markets had showed signs of stabilisation.

However, the housebuilder said the market is not showing signs of improvement so has taken action now.

Barratt, which sells 1,000 houses a month and has a debt mountain of £1.3 billion, has been struggling amid the housing downturn.

Last year, headcount at the company was reduced by 29% as a result of falling sales due to falling house prices and the tightening of mortgage criteria.

Many housebuilders are still fearful of the lack of mortgage availability and believe it still continues to have an impact on the recovery of the UK property market.

Earlier in the summer, Barratt reported renewed interest in their developments but said potential buyers are still unable to secure a mortgage.

Fellow housebuilder Redrow cautioned that the mortgage drought was “without doubt… a major obstacle to the recovery of the housing market”.

In related news, Redrow has also announced a share issue today to reduce its debt. Sky News has reported that the company is to raise £150 million via a rights issue.

In addition, property developer, Liberty International, is tapping investors for around £300 million.

Galliford Try, Bovis, Bellway and Berkeley have all taken action this year to raise cash from investors.