Barratt shares soar 25% after lender agreement

Shares in Barratt rose by up to 25% in early trading this morning after Building reported that lenders had agreed to waive banking covenants after land writedowns in July.

The share price climbed by as much as 25% to 98p in early trading.

There were gains eleswhere. Persimmon rose 5% to 383p, Taylor Wimpey rose 8% to 72p and Redrow was up 9% to 168p.

The £3bn-turnover housebuilder is in talks with the Royal Bank of Scotland, UBS, HSBC and Lloyds. Sources close to the talks said an agreement had been reached to waive a clause that could have put Barratt in breach of its lending covenants after it writes down the value of its landbank in July.

These “asset cover covenants” govern the ratio of debt to assets, and breaches were thought likely given the falling land market and Barratt’s debt of £1.8bn.

A source close to the talks says all Barratt’s other refinancing options have been ruled out. It is understood the waiver will remain until it has repaid the remaining £400m it borrowed to fund the £2.2bn acquisition of Wilson Bowden in February 2007. It has until the middle of 2011 to do this.

They said: “A loan to equity swap was a ludicrous suggestion because the banks don’t want to take on that sort of risk. And a rights issue is out of the question at the moment given the share price.”

Other sources suggested the banks were effectively forced into a corner. They said: “With massive mortgage books of their own they were never going to let Barratt go under. There was effectively no choice but to offer the waivers.”