Barratt sticks to 'no comment' as share prices surge

Barratt is single-handedly occupying more column inches than the rest of the entire housebuilding sector…. even throughout the weekend.

To sum up: Friday was good news for Barratt as its share price jumped by 25% as a press report suggested that the banks were taking an understanding view of the company’s massive £1.8bn debt burden.

But how true was it?

Punters with money in their pocket piled into the shares, but as the Financial Times reported: “People close to the situation said if the news story were true, it would constitute a material fact that Barratt would be obliged to communicate to the market.

“They’re talking to banks, that much we know, but there’s no way anything’s been signed,” added the FT. “It might happen but it hasn’t yet.”

Barratt’s lenders will apply the covenant test on June 30.

At that point Barratt’s loan : net value ratio must not exceed 85%.

Even now it is going to be a close-run thing.

But should it be panic stations? Perhaps this is all a storm in a tea-cup.

The credit crunch might just have a silver lining for Barratt and its fellow housebuilders as it has left their creditors, the big banks, in rather bad shape.

As the Daily Telegraph points out: “This means that, for now, it is not in the banks’ interest to force the issue if companies break their loan covenants – for example, by making them swap debt for equity – because they are desperately trying to shrink their balance sheets.

“It may well make more sense for banks to ease conditions on covenants for a while, provided, of course, they believe interest payments will still be made.”

Barratt spent Friday saying “no comment”.