The timing by Barratt Developments and Redrow of their aggregate £880m equity raising looks smart with shares up 180% and 40% respectively in the year to date, says Lombard, in the Financial Times.
Barratt’s £721m rights issue was priced 63% below the share-price close on Tuesday compared with 55% for Redrow and 44% on average for the sector this year, according to Dealogic.
The writer says the cash calls do not herald “a new hurrah” for the property market but notes that some of them will be channelled into investment, albeit the alternative would be shrinkage.
Barratt said developing sites would generate cash that could be used to meet the company’s urgent need for more housing plots. It said the company could not allow its land bank to keep running down.
Barratt reported a full-year pretax loss of £679m compared with £137m profit last time on revenue down from £3.6bn to £2.3bn. The Financial Times says a chastened housebuilding sector can now get back to the building blocks having overcome their debt problems although investors want to see change in their operations.
Redrow is raising £1250m in a 13-for-14 rights issue to revise its debt covenants with banks. Investors are predicting Persimmon will follow suit. Viewpoint, in The Guardian comments on the £25m underwriting costs for the Barratt raising, another £23m for rearranging the banking facilities and other costs thrown into the melee.
The writer notes the bill would have been even higher if chief executive Mark Clare had listened to those in the City who argued in 2007 that the Wilson Bowden deal should have been totally funded with debt. He says it was Clare’s decision to opt for two-thirds which probably kept the company alive. Panmure Gordon moved Barratt from “sell” to “hold” and reiterated its “sell” rating on Redrow. Barratt closed up 7.2p at 257.7p and Redrow fell 6.5p to 227p.
24/09/09 Financial Times 20, 22 Times 43, 49 Daily Telegraph B1, B2 Guardian 28, 29 Independent 40, 48
