McInerney set to breach bank covenants

HOUSEBUILDING group McInerney Holdings admitted yesterday it will breach certain bank covenants when they are tested later this month.

The Dublin-headquartered group has been in talks aimed at revising its banking and funding terms for some time and these are ongoing.

In its latest trading update, McInerney said: “The covenant position is being dealt with within the banking negotiations that are currently under way. Negotiations with the group’s funders are progressing. The directors anticipate reaching a positive outcome to the banking negotiations prior to the next results announcement in March 2010.”

The group’s shareholders were told by management – at the end of September – that the banking terms talks were “proceeding constructively” and that while an early conclusion wasn’t anticipated, the banks were supportive of the measures the group has taken in response to challenging market conditions.

Those market conditions remain bad, with yesterday’s statement confirming: “The group continues to experience poor trading conditions in its key housing markets of Ireland and Britain.”

It added: “In Ireland, the group’s house sales remain flat. Low consumer sentiment persists and this, coupled with a lack of mortgage availability, is curtailing market demand. The prospect for any change to the current market conditions is uncertain. In Britain, the housing market is stabilising and the group is experiencing a steady rate of house sales, albeit at low levels.”

Management also re-iterated that it continues to review and consider the disposal of all non-cash generative aspects of the business as part of its cash flow maximisation and cost-cutting policy.

In September, McInerney posted a first-half pre-tax loss of €12.8 million (before exceptional items were factored in), announced an impairment charge of €156m and halved the value of its Irish land bank by 50% and its British land bank by 40%.

The group’s share price was up by 5.88%, yesterday, at 18c.