On 10 July 2008, the Financial Times reported that Barratt, the housebuilder, had finalised discussions with its lenders to revise its banking covenants and extend its borrowing.

Barratt had been reported to be on the verge of breaching some of its banking covenants, but has avoided doing so by successfully negotiating:

1) The replacement of an interest-cover covenant with a cashflow covenant.

2) The relaxing of the gearing and minimum tangible net worth covenants.

3) An extension of its existing revolving credit facility.

In the current economic climate, lenders are likely to see more borrowers trying to refinance in this way.

For more on covenants, see the section on covenants in Practice note, Corporate loan facilities and Borrower's covenants: drafting note.

Source: Financial Times.