FEARS are mounting over the financial health of Britain’s biggest boiler-maker Baxi, one of a string of companies wrestling with heavy debts as the recession continues to bite.

This weekend the financial crisis is engulfing companies across every industry sector – from housebuilding to entertainment, car dealing to manufacturing.

Ratings agency Standard & Poor’s (S&P) has once again downgraded Baxi’s credit rating, warning that the private-equity-owned manufacturer of the Potterton, Valor and Homeflame boiler brands could default on its debt repayments.

S&P is concerned by “the group’s fragile liquidity position, weak prospects for the markets in which the group operates and, to a lesser extent, the likelihood of a covenant breach in the next few quarters”.

At the end of September, Baxi’s net debt, which already held junk status, stood at £644m, up from £612m a year ago.

The news is a further blow to private-equity firm BC Partners, which bought the company for £660m in 2004 and was forced to inject a further £40m into the business last year. Derby-based Baxi employs 5,400 people in the UK. Martyn Coffey, Baxi’s chief executive, admitted market conditions were tough but pointed to third-quarter sales 8% higher than the same period last year and underlying profits up 58% at £18.5m.

“We are confident about our liquidity position and, as S&P notes, we have no significant debt maturities until 2010,” he said.

Meanwhile, Postman Pat is delivering a slew of P45s at Entertainment Rights, home of the children’s character, together with The Lone Ranger, Lassie and He-Man. Among those expected to go is chief executive Nick Phillips who was appointed eight months ago with a brief to revive the business.

Some 30% of jobs are being cut in Britain with 50% of the headcount in America expected to be axed as part of a £5m cost-saving round.

“ER is doing everything it can to minimise redundancies wherever possible,” the company said. With a market value of £8m, ER is buckling under £125m of debt and has breached banking covenants. However, it is close to announcing that lender Bank of Scotland has given it a stay of execution – essentially greater borrowing headroom and the deferral of penalty costs.

Over at car dealer Pendragon, a team of advisers from KPMG has been drafted in as concerns mount over deteriorating trading and heavy debts. The company’s main banks, Royal Bank of Scotland and Barclays, are worried that if trading does not improve it risks breaching banking covenants next year.

The firm, led by chief executive Trevor Finn, is drawing up contingency plans to present to the banks in the next few weeks. They include the sale of property assets or, in the worst case, a debt-for-equity swap.

Pendragon, the UK’s largest Vauxhall dealer, has a market value of just £30m. It is understood the company has used close to £400m of the £550m of debt available to it through a credit facility and loan notes.

Debt-laden housebuilder Taylor Wimpey is trying to sell off 270 acres of land with planning permission to raise cash. The group has hired Savills to advise on the sell-off, which includes plots in 30 locations from Scotland to the south of England, which could accommodate up to 4,000 homes. It is thought the company hopes to raise as much as £100m from the disposal.

The group is trying to raise funds as it battles with its lenders to secure a covenant waiver for its £1.9 billion debt mountain. Falling home sales and land values mean the company could breach its covenants in the next few weeks. It is working with banks on a debt-for-equity swap.

At the same time, doorstep lender Cattles has been warned of a possible credit downgrade by rating agency Fitch over concerns about its funding position.

The group is in talks with its lenders, led by RBS, about renegotiating a £500m credit line that is due to expire next summer. It is also trying to obtain a banking licence from the Financial Services Authority which would allow it to start taking deposits from customers. Fitch has put the firm’s BBB-rated senior unsecured debt on negative watch.

Meanwhile, Trinity Mirror has sold four free Midlands newspapers to Yattendon Investment Trust, the investment empire of Lord Iliffe. The Northampton Herald & Post joins the Cambridge Evening News in his portfolio.

Trinity, whose titles include the Daily Mirror and South Wales Echo, has closed 28 newspapers so far this year in a cost-cutting drive and last week announced 78 job cuts in Liverpool. Chief executive Sly Bailey is lobbying for regulatory relief so the newspaper industry can undergo a new wave of consolidation. Trinity’s most likely merger partner is Johnston Press. The pair have combined debts of £875m.

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