Barratt Shares Rebound After Reports Of Banking Deal
Barratt Developments, the epitome of the current malaise in the house building sector, is rumoured to have agreed a deal with its bankers to give the company more time to get its balance sheet in order. While talks with the company’s bankers had been rumoured for a few days ago, with the market concerned that the Barratt’s was in danger of breaching banking covenants, there has been no official confirmation of any deal. However a 25% rebound in the share price yesterday seems to confirm that a deal is not far away.
It has been suggested that the banks are willing to extend the company’s banking covenants until the group is able to repay the reported £400 million used to acquire Wilson Bowden just last year (which is on top of the report £1.8 billion debt mountain). There were fears that the group may be in trouble later this year if, as expected, the company’s land bank is severely downgraded.
While on the surface this reported extension of the banking arrangements for the group, and the willingness of banks to be supportive in this trouble period is encouraging, not all analysts are convinced. There are some in the industry that believe the banks could not afford to call in debts from the likes of Barratt and risk pushing the company into administration or receivership, or even contemplate a debt for equity swap.
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