Housebuilders Barratt and Redrow and property developer Liberty International announced fundraising drives worth a combined £1bn this morning, in a bid to get themselves out from under their big debt piles and build up some financial firepower. Given how the reputation of the building industry has ben dragged through the mud this week with this OFT price-rigging business, Barratt or Redrow (neither of whom were named and shamed) will have been delighted to have got their cash-calls away. And perhaps more importantly, the fact that they're raising funds probably suggests that they think the foundations for recovery are finally in place...
Barratt's fundraising is the biggest - it's tapped the City for £720m, not only to pay off the banks (its debt pile will shrink by 45% as a result), but also to buy new land and build houses. Smaller rival Redrow is raising £156m in a similar deal, while shopping centre developer Liberty wants £305m to fund its own acquisitions. All three are following in the footsteps of rivals like Bellway and Berkeley, who have also announced fundraising efforts lately. (In fact, it's been a busy morning for this kind of thing: Yellow Pages publisher Yell also wants investors to cough up about £500m to trim its own vast debt pile.) Good news for a lot of under-employed investment bankers, who stand to cash in on some juicy fees - Barratt alone is shelling out £50m...
But it also looks like a healthy sign for the property industry more generally. News of these cash-calls has inevitably prompted speculation that these companies are running short of funds because sales are flagging so badly. But Barratt in particular has previously said that it wouldn't try and raise extra funds until the market had stabilised - and chief exec Mark Clare said today that they'd seen evidence of this in the last eight months. And the proof of the pudding is that he's seen reservations jump 53% in the last 11 weeks - albeit from a horribly low base, but still.
Of course, Clare is still not exactly jumping for joy. After all, he was also forced to confess today that Barratt made a loss of £679m in its last financial year - and even after this recent upturn, its sales are barely back to pre-crunch levels. So he's unsurprisingly cautious about any talk of 'recovery'. But generally, the message from all of those companies today (like Land Securities yesterday) was that the worst seems to be over. As Redrow chairman Steve Morgan put it: 'We don't see a huge recovery but we are pointing in the right direction'. Let's hope he's right...
In today's bulletin:
Builders tap the City for £1bn as business picks up
Bad inductions can be a killer for the NHS
German bankrupts go for broke in Tunbridge Wells
Credit-crunched public giving less to charity
1,400 jobs to go at Vauxhall now Magna's at the wheel?