Value of Britain’s second biggest housebuilder falls to £213m after report of ‘black hole’ in its accounts

City analysts have raised the possibility of housebuilder Barratt Homes being taken into administration after it lost half its value in the first three days of the week. As Building went to press, Barratt had a market capitalisation of £213m, down from £488m on Monday. It has an outstanding debt of £1.7bn.

Barratt’s slide came as shares in all quoted housebuilders slumped after more negative news about the housing market. Taylor Wimpey lost a third of its value.

Barratt is seen as vulnerable because of the debt it took on to fund its £2.2bn purchase of Wilson Bowden last year.

Richard Kelly, partner at accountant BDO Stoy Hayward, said: “It’s potentially going to be very difficult for a number of housebuilders to get through the next few months [as a going concern]. Those who don’t have massive debt burdens will be best placed to struggle on.”

Another City source, who declined to be named, said: “When the share price falls this far, the market is saying it expects the company to go bust.”

The fall in Barratt’s share price came on the back of a negative note from Dresdner Kleinwort telling investors not to buy shares in the firm at any price.

The note, from analyst Alistair Stewart, said the firm faced a £1bn black hole in its finances, and it was not clear how debt would be paid. It said: “Nobody should consider buying until details of writedowns, gearing and any financial restructuring become clear.”

Analysts said it would now be difficult for the firm to raise money through a rights issue, and that a debt-for-equity swap was more likely. This would mean banks agreed to swap the debt for a stake in the company.

An insolvency specialist said Barratt was unlikely to go into administration. “I think we’re a long way from Barratt going to the wall as long as it services its debt. The banks won’t want to pull the plug because they’ll get so little from it.”

A spokesperson for Phoenix Asset Management, which owns 7.4% of Barratt, said: “None of its debt falls due in the near future, but if they want to repay debt they just have to run the business for cash.

“We fully support the management who are in our view running Barratt in the long-term interests of shareholders.”

Barratt is the only major housebuilder not to announce redundancies over the past three months.

On Wednesday Barratt was forced to calm investors’ nerves with a statement to the stock exchange that said it was operating within its £2.6bn debt facilities and was on course to hit a pre-tax profit of £395m.