Barratt slashes borrowing costs with major refinancing

Housebuilder Barratt Developments has completed a major refinancing package ahead of schedule to greatly reduce its borrowing costs.

The refinancing trimmed Barratt's underlying interest rates from 7.0% to 4.5%.

Due to its "much improved financial performance", the group had made early repayments of its historic high-cost private placement notes, replaced by new borrowing facilities of around £1.5bn at more attractive terms over periods of up to eight years.

The refinancing provides the group with around £850m of committed facilities to June 2016 and £650m to May 2018, with some facilities extending as far as 2021.

Future facilities include a new £700m committed bank revolving credit facility, reducing to £550m in June 2016 to reflect the group's reduced borrowing requirements, and maturing in May 2018.

Barratt will also retain $80m of private placement notes that were issued in May 2011 and mature in August 2017, swapped into sterling equating to a £48m fixed-rate loan, and retain the £100m term loan from The Prudential-M&G UK Companies Financing Fund that was drawn in July 2011, of which 25% is scheduled to be repaid in 2019, 25% in 2020 and the balance in 2021.

Barratt also raised £34m by monetising part of its shared equity portfolio.

Group Finance Director David Thomas explained the monetisation of the shared equity portfolio represented a further measure to improve profitability, reduce net debt and increase return on capital employed.

He added the fact the group had been able to conclude the monetisation deal now was "further evidence of the improving outlook for the sector", while the refinancing package reflected Barratt's improved financial position and "the significant progress we've made towards our target of zero net debt as at June 30th 2015."

As it moves towards that target, the group expects to have net debt of £100m by June 30th, down from £168m a year before.

Shares in Barratt Developments were up 1.4% at 315.74p at 08:55 on Wednesday.

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