The slump in the housebuilders is accelerating, with Barratt Developments now down nearly 30%. The whole sector is in decline, but Barratt is in serious danger of dropping out of the FTSE 250, just six months after leaving the FTSE 100.
The general background is one of a dramatic drop in the housing market, most recently evidenced by today's RICS survey. A Goldman Sachs downgrade of a trio of housebuilders - Persimmon, Redrow and Bellway - has not helped.
But Barratt's drop is something else. The company has been widely reported to need a rights issue since it has debts of £1.7bn after its purchase - at close to top of the market - of Wilson Bowden. But with its shares so lowly rated, a cash call now no longer seems an option. Traders believe its bankers may now hold the upper hand, and some sort of debt for equity swap is the only answer. That certainly would account for the day's decline in its share price.
Surely the company now has to issue some kind of statement to clarify the situation?
