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Barratt and Redrow to tap shareholders for £850m

Housebuilders Barratt Developments and Redrow are expected to announce fund-raisings of £700m and £150m respectively, as they repair balance sheets that have been ravaged by the recession.

Barratt was understood to be working on a placing of up to £100m at a 10pc discount to its current share price
Barratt was understood to be working on a placing of up to £100m at a 10pc discount to its current share price

On Tuesday Barratt was understood to be working on a placing of up to £100m at a 10pc discount to its current share price, with the balance to be raised via an open offer.

Redrow is expected to raise the money through a rights issue.

It was thought Barratt was going to ask investors for a smaller amount of £500m in a fund-raising to be announced next week. However, the company may have brought it forward when it emerged Redrow was to move earlier.

Neither company would want to risk investor fatigue by being the last in the queue to ask for more cash.

Four housebuilders have already tapped the market. In May Taylor Wimpey raised £510m, while Bovis, Berkeley Group and Bellway have all raised between £49m and £60m each.

After Barratt and Redrow, Persimmon is the only significant housebuilder not to have raised more funds from shareholders.

Housebuilders have been some of the hardest hit companies during the recession. Barratt has seen its shares fall from a peak of £12.66 in January 2007 to 268.5p yesterday.

It has been forced to refinance its £1.3bn debt mountain at a higher cost and has written down the value of its land bank significantly.

Two weeks ago Redrow announced its worst set of annual results – a loss of £140.8m – with sales down more than 50pc.

Although house prices have rallied slightly over the last few months, according to Nationwide and Halifax, over the last 18 months they have fallen by up to 20pc in some areas.

Turnover in the housing market, in many ways more important than house prices for housebuilders, has also fallen away.

Despite a difficult couple of years, Redrow and Barratt will attempt to put the pain of the recession behind them with the fund-raisings. Messages coming out of the sector indicate that the worst of the write-downs are behind the pair and sales have stabilised.

The two fund-raisings come as a number of other companies either have, or are expected to, ask shareholders for money.

Last month, The Sunday Telegraph revealed that insurer RSA was preparing to ask investors for £614m as part of an autumn round of fund-raisings that could top £5bn.

Both Barratt Developments and Redrow declined to comment.