Barratt has come under increased pressure from its lenders to raise cash through a rights issue in the wake of Taylor Wimpey’s success in raising £510m last week
According to a source close to Barratt’s banks, they want a cash injection of at least £300m to shore up the housebuilder’s balance sheet, which has about £1.42bn of debt on it.
The source said: “Obviously it’s the company’s choice, but the recent equity issuances from Taylor Wimpey and Travis Perkins have put added pressure on Barratt to move quicker rather than slower.”
Speculation over the rights issue has intensified in recent weeks, with City analysts saying the company may take advantage of improved sentiment towards housebuilders.
The source said the company was waiting for its share price to increase so it could raise proportionately more cash and minimise the dilutive effect of issuing new shares.
There have reportedly been a series of meetings with lenders and shareholders about a possible cash call since it refinanced last July. It is thought that it would wait for a share price of about 240p before any rights issue, but this is likely to have fallen after the Taylor Wimpey move. The company’s share price on Wednesday morning was 150p.
Mark Clare, Barratt’s chief executive, ruled out an imminent rights issue at a trading update on Wednesday but said it was a consideration in the longer term.
He said: “There are no plans. But if the market continues to improve, who knows? If there comes a point when there are big opportunities, we need to look at options.”
Barratt’s first 19 weeks of 2009
- Net reservations 0.47 per week per site, up 4.4% on the same period last year and up 20.5% compared with the six months to 31 December 2008
- Visitor levels down 6%
vCancellation rates down to 16%, compared with 25.7% in 2008
- Forward order book £778.2m (5,253 plots), up from £455.8m (3,529 plots) on 1 January 2009.