More on Barratt Developments. At least some of today's share price damage - a 24% decline following yesterday's 14% fall - is due to a damning sell note from Dresdner Kleinwort.
To recap, Barratt has debts of £1.7bn after its takeover of Wilson Bowden, and there have been growing concerns it needs a refinancing to bolster its balance sheet.
Cue Dresdner: "With Barratt's share price falling with seemingly no means of visible support, we have withdrawn our target price (previously 199p) since we cannot gauge the dilution of a financial rescue package - nor indeed the chances of one being supported. Although we would not rule out a financial partner emerging, the risks on the downside weigh against us recommending a buy at any price until there is more financial clarity.
"We believe even at these levels existing shareholders should cut their losses and no one should consider buying until details of writedowns, gearing and any financial restructuring become clear.
"However anyone short of the stock should consider the implications of any eventual share suspension.
"We believe the true picture of Barratt's debt may be much worse than the market anticipates and that the level of new funding needed may be more like £1bn than the £500m mooted by a number of commentators.
"We believe now the year end [debt] figure will be over £1.8bn (with possibly a rise in trade creditors). At least £1bn [of refinancing] may be necessary. At these levels a discount of around 50% may be required - at a market capitalisation of £440m a possibly unfeasible 5 for 1 rights issue."
Barratt is due to issue a trading statement in early July when it will give an update on how much the value of its land assets may have fallen - a key factor in determining whether it can keep within its banking covenants.
But a holding statement may not appear despite the recent share price slump, given that the company can sensibly say little apart from noting the decline since it is still working out the land value figures.
Meanwhile Barratt came periously close to losing its place in the FTSE 250, just six months after it was dumped from the 100 index. It now stands at position 352 in the UK's 350 top companies, and needed to drop below 376 to fall out at the quarterly review decided on this evening's closing prices. Before today's decline it stood at position 301, so it is safe for the moment. But if things continue in this vein, its FTSE 250 days may be numbered.
