13 June 2008
Barratt Developments share price is levelling out after plunging this week over worries it will breach banking agreements.
The beleaguered company, whose shares slumped 40 per cent on Tuesday and Wednesday amid worries about its financial position, has reassured investors it is operating within its agreed limits.
Shares are up by more than 15 per cent as two City brokers maintain "buy" recommendations and one said the sell-off looked overdone.
At the end of the month, auditors will check whether the group's net debt at its June 30 year end - expected to be £1.7 billion - exceeds 85 per cent of the firm's net asset value, which is assets less total liabilities.
Analysts fear hefty write-downs of Barratt's land bank thanks to a downturn in the housing market could see the measure go over the 85 per cent mark, leading to a possible rights issue to help bolster the balance sheet.
Barratt, chief executive, Mark Clare said he expected no breaches would occur at the current year end. But he warned that "grown-up discussions" were taking place with bankers about what could happen if the housing market worsened in the coming months.
Mr Clare said there was "not a lot of headroom" with the debt to net assets measure.
"It's tight enough to be talking to the banks about what might happen if the market deteriorates any further," he said.
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