British home builder Barratt in 720.5 million pounds rights issue

UK home builder Barratt raising 720.5M pounds

LONDON — Major British home builder Barratt Developments PLC announced a rights issue Wednesday to raise 720.5 million pounds ($1.18 billion) to beef up its balance sheet and prepare for new land acquisitions.

The fundraising was announced as Barratt reported a loss of 486.6 million pounds for the year ending June 30, compared to a profit of 86.4 million pounds a year earlier.

However, the company said a degree of stability had returned to the housing market, following a sharp drop in house prices and new construction because of the global credit crisis.

Barratt said it expected to complete 12,000 homes this year, down from 13,200 in the recent full year and more than 18,000 in the previous year.

The average selling price in the latest full year was down 14 percent compared to a year earlier.

CEO Mark Clare said the company had been able to maintain price levels and increase reservation rates in the second half of the calendar year.

“The board has therefore decided it is now an appropriate time to substantially strengthen the company’s balance sheet and reduce its debt levels via a placing and a rights Issue. This will also enable the group to develop a number of its existing sites and to take advantage of land purchasing opportunities as they arise,” Clare said.

Barratt shares closed up 2.7 percent at 275.7 pence on the London Stock Exchange.

Alastair Stewart, analyst at Investec Securities, said he suspected Barratt would use the funds to reopen existing sites rather than buy more land. He continued to rate the shares as “sell.”

“We believe that further writedowns could follow after an issue and that Barratt and others (in the sector) could be back to the market in the mid-term for further equity issues, since balance sheets remain under-strength to fund genuine growth,” Stewart said.

On the Net:

www.barratthomes.co.uk