Barratt close to securing debt deal
Housebuilder Barratt Developments is today expected to reveal it has managed to renegotiate a refinancing package with its bankers.
Barratt, which has £1.7bn debt and a market capitalisation of just £140m, has been negotiating with lenders to extend repayment of £400m debt due in April , as well as agree changes to its debt covenants to reduce the chance of them being breached.
Today’s full year trading statement will round off a torrid week for the housebuilding sector. Housebuilders Redrow and Bovis joined the growing casualty list in the sector yesterday as they both axed 40 per cent of their workforce.
Both firms reported massively reduced sales, and Redrow, one of the top four builders in the country, said significant write-downs on the value of its land were likely.
As the mortgage market nears a state of near paralysis, the fall-out among builders balloons, with reports of wobbling sales, plunging completions and rising cancellation rates.
With the problems for homebuilders mounting, analysts said Redrow could fail to meet its interest cover for debt, meaning its lenders could ask the group to raise fresh equity.
Last week, fellow building giants Barratt and Taylor Wimpey cut nearly 2000 jobs between them to cope with the sharp deterioration of the market.
This takes the bloodletting tally in the construction industry to 5,500 this year.
Redrow said in a statement yesterday: “We have experienced an unprecedented decline in the fortunes of the UK housing market in a very short period of time.”
It said reservation levels in the first half of the year were 55 per cent down on 2007, while cancellation rates in the last six months were just under 30 per cent, as customers failed to secure loans to buy houses.
Bovis, which also made a cull of about 500 staff yesterday, said it would not be making any write downs on the value of its landbank.