Housebuilder close to refinancing deal as it confirms 1,200 jobs will go
Shares in housebuilder Barratt rose 17% after it said it was close to completing a refinancing package that will see its bankers relax its covenants and delay repayment of £400m of debt. Building first revealed news of the refinancing deal in June.
Barratt finance director Mark Paine told journalists he expects to sign the deal in “weeks not months”, which would see the repayment of £400m in debt pushed to 2011. “We have a very detailed terms sheets, and we’re only down to the legal documentation now,” he said.
According to a trading update Barratt has persuaded banks to relax its covenants, after coming to the conclusion that it was in danger of breaching them if the market continued to decline.
The statement said: “We have agreed (subject to final documentation), a restructuring of our covenant package with our banks and private placement note providers well in advance, as an appropriate, prudent response to current market conditions.”
Specifically this would relax the ratio of debt to income as well as the minimum company valuation needed to trigger repayment of loans. Barratt’s market capitalisation has fallen by 95% in the last year, making the company worth just £190m.
This is in addition to another deal to secure £400m of debt that was previously announced by the firm in May.
As expected the firm said it is laying off more than 1,000 people, as first revealed in Building – to bring its workforce down from 6,700 at the start of the year to 5,500. Chief executive Mark Clare said this means in total 2,000 people have been made redundant following last year’s merger with Wilson Bowden.
Clare admitted that weekly sales in the past three months were half what they were at the same time last year, and said he expects no improvement in the market in the next 12 months. Forward sales are 50% down on last year, at £700m, with £539m of that contracted – a 37% drop.
Clare said: “This is an intensely difficult and unpredictable time. However, visitor numbers are only down 15%, showing underlying demand, but more recently I think it’s fair to say the general economic health of the country is starting to weigh on the mind of homebuyers.”
