Budget housing provider Lifestyle Communities is at risk of breaching a critical debt agreement following a tribunal ruling that found its exit fees invalid, prompting analysts to warn of heightened financial pressure and potential loan defaults.

Citi analyst Suraj Nebhani said the company risked falling short of its interest coverage ratio covenant, a banking agreement that requires earnings to remain above a set multiple of its interest expenses. A failure to maintain the required ratio can trigger a loan default, potentially leading to penalties or even the loan being called in.