Barratt Bank Covenants Safe - Unless There's A Meltdown

摘要

Barratt would only breach banking covenants in the event of "a real meltdown", according to sources close to its refinancing talks.rnThe comment echoes a claim by chief executive Mark Clare as the housebuilder announced a loss of almost ￡600m in the six months to 31 December 2008 this week.rnClare said covenants would only be tripped on its ￡1.4bn debt if there was "a material step down" in market conditions similar to the collapse of Lehman Brothers.rnHe said: "Events like the Northern Rock collapse and the problems faced by HBOS and RBS severely constrain credit and are outside our control. It's difficult to say they won't happen again,rnbut the government has taken action to prevent that."rnAlthough some analysts expressed concern that the spectre of a covenant breach had been raised, the source close to the talks dismissed the possibility after they were relaxed last July. "Despite ill-informed analyst comments, the covenants remain fine. They were stress-tested when they were set and it would take a real meltdown to trip them."rnThe source went on to downplay the possibility of a rights issue, saying it was not needed. Clare, too, said that the company had no plans for a rights issue this year.