Oakdene Homes' shares dive 37% in a single day

Oakdene Homes was in the wars yesterday as its share price tumbled by 37%.

The collapse was triggered by news that the developer was resorting to the use of a temporary banking facility following the breach of its debt covenants.

The share price fall could have been much worse: it came despite assurances from chief executive Carl Turpin that he had agreed in principle a £2.5m cash deal, a move that would be sufficient to tide the group over until the sale of completed homes replenished Oakdene’s balance sheet.

The Financial Times talked to Turpin and this morning the paper reports him as believing that Oakdene’s financial difficulties were a “cash-flow glitch”.

The FT reports Turpin saying: “We will be in a position to make an announcement about the bank deal in the next seven days. Once we’ve concluded the talks we will be in a strong position to move forward.”

Oakdene might be the first housebuilder to publicly admit to breaching its banking covenants but many other privately-owned groups are said to be in the same situation.

The situation with the larger Stock Market-quoted housebuilders is that they are making moves to restructure their funding arrangements ahead of anticipated breaches.

Yesterday, Oakdene’s share slumped from 14p to just 9p.

Turpin has ruled out the possibility of selling Oakdene to a rival. He told the FT: “We’ve had a couple of approaches in the past 12 months, but no-one has the cash available to make purchases now.”