There was a rare sigh of relief in the housebuilding sector on Wednesday as Barrattreported reservations were down by only one-third since the start of the year and eschewed a rumoured rights issue.

Barratt is the last of the large developers to report figures, and many in the markets had feared that falls in net reservations would be worse than the 33.6 per cent decline it announced for the year to date.

In line with other builders, Barratt described “a significant fall” in net reservations over the past six weeks, which Mark Clare, chief executive, estimated were down about 50 per cent on the same period last year.

Total housebuilding revenues for the year to date were £825m compared with £893m last year, a fall of 7.6 per cent, reflecting Barratt’s relatively strong pipeline of buyers at the end of 2007.

“We do not expect to see a meaningful upturn in the housing market until there are improvements in the availability of mortgage finance,” Mr Clare admitted, though the medium-term outlook was rosier.

Market rumours of a rights issue were effectively quashed yesterday, as the developer said it had paid down £200m of an £800m tranche of debt due for repayment next April, and had agreed with its bankers in principle to refinance £400m for an additional two years.

“This will effectively remove short-term funding requirements,” Mr Clare said, adding that there had been no discussion internally to initiate a rights issue.

Barratt forecast debt levels at the end of June to be £1.7bn, about the level of its half-year figure in December but slightly higher than its own estimates last quarter.

The shares closed down 1p at 257¼p.

FT Comment

Barratt has scored a quick win by resolving its short-term financing issue, but that does not mean it is out of the woods. Though its £2.6bn headline banking facilities figures suggest an ample £900m headroom, they depend on covenants that could yet get breached. In particular, its debt needs to stay below 85 per cent of tangible equity. That means any writedown in the value of its land – a decision Deloitte, its newly appointed auditors, will have to advise on at year-end in June – would have to be matched by a cut in debt. That could prove difficult. The crux is that Barratt has a huge land bank relative to its equity base. In the past downturn, in 1989-92, land lost more than half its value compared with a 12 per cent slip in house prices. Those levels of house price falls now look likely, which could filter through to lower land prices, prompting asset writedowns that will lead to banking covenant being breached and force a capital-raising exercise. All that may or may not happen, but bear in mind that Barratt is currently trading at a 60 per cent discount to its tangible net asset value.