Barratt denies media reports that it has debts close to £2bn, which must be reduced to meeting banking obligations

Barratt Developments has dismissed a report in the Observer that it is at risk of breaching its banking covenants..

The story claimed the housebuilder has debts approaching £2bn and needs to reduce the figure by £100m in order not to break its contractual obligations with the banks.

Shard End
Barratt's Shard End development in Birmingham

A Barratt spokesman said: “The company does not understand the story in the light of its recent trading update. Ahead of our interim results we cannot go into the details but our update made it clear that we were operating well within our facilities.

“We also made it clear that we are still spending £1.2bn on land in the current financial year, which is a significant commitment.”

Barratt borrowed heavily after it bought housebuilder Wilson Bowden for £2.2bn last April, before the credit crunch caused house prices to fall.

Its order book at the half-year ended 31 December 2007 stood at £1.26bn, nearly 6% down on a year ago.

At the end of November, the company said that sales of the company's houses and flats had fallen 14% since the summer as lenders held back in the wake of the Northern Rock crisis.

At lunch shares had risen 24.5p to 394.5p.