New loans arrangement costs it £55m
Housebuilder Barratt has completed a £1bn refinancing that will however cost it £55m in fees and the cancellation of hedging arrangements.
Chief executive Mark Clare said the refinancing will save Barratt at least £5m a year in reduced interest payments, with this figure likely to increase as the company reduces its ongoing debt mountain.
The refinancing will provide it with £680m of committed bank facilities until May 2015, with a range of other fixed term loans worth up to £1bn in total, with some facilities lasting until up to 2021.
Clare said: “This re-financing will eliminate the inefficiency of having a fully drawn loan meaning we have cash in the bank when our need for debt reduces. Going forward we will really benefit from the ongoing reduction of debt this allows.”
Cancelling £290m of hedging arrangements, in the form of interest rate swaps, will cost Barratt £30m.
The refinancing was announced as part of Barratt’s interim management statement to the city, in which it said trading had continued to recover from the low levels seen in the autumn, with average sales per site per week rising from 0.39 in the autumn to 0.53 since January. This is still lower than the 0.56 seen in the same period last year.
Forward sales are also marginally down on last year, at £1.05bn compared with £1.07bn at this point in 2010.
It has spent £78m on land since January, with two-thirds of the purchases having been in the North of England.
Clare said the government’s announcement of the First Buy programme would help to bolster sales over the next 18 months. He said: “First buy gives us 18 months of breathing space. We’d still prefer not to be lending our customers money, but it’s a short term solution. All our attention is on that in the short term.”