Hafod, a Welsh registered registered social landlord providing affordable housing and care support, has obtained £70m in new funding whilst also restructuring £90m of debt across their treasury portfolio.
Hafod’s treasury portfolio was characterised by legacy bank facilities which required a complete restructure to:
Modernise covenants; gearing and interest cover covenants required alignment to market – this allowed them to materially increase headroom and reduce covenant risk.
Suitably fund the business plan; the debt portfolio required a reshape to improve cost efficiency and de-risk the business.
Manage risk; bank facilities, and associated fixed rates were to mature in the near term and required refinancing/restructuring to reducing interest rate and refinance risk.
Centrus’ role and value add
Centrus acted as financial advisor, identifying both the optimal funding solution to meet Hafod’s needs and then subsequently seamlessly executing it, ensuring all Hafod’s objectives were achieved.
Centrus’ in-depth knowledge of the market meant we were perfectly placed to negotiate on Hafod’s behalf to reset current covenants, request additional funds and have a targeted approach to the wider market; ensuring that terms achieved both value for money and Hafod’s treasury objectives.
Centrus’ diligent management of the process, from origination of the strategy to executed documentation, meant the process was efficiently delivered within the required timeline. This was particularly important when external conditions meant that Hafod had to react quickly and efficiently to ensure the best possible outcome.
“Centrus worked with us to develop our strategy before then leading on its execution. The team at Centrus ensured we have been able to control the process throughout despite, at times, a challenging backdrop and ultimately to materially improve our treasury position. With this work complete we can now focus on delivering our ambitions to build 500 homes over the next 5 years”
Chris Judson, Interim Corporate Director – Finance, Investments and Development, Hafod Housing Association
The Baillie Gifford Japan Trust PLC (“Japan Trust”) is an investment trust focused on investing in Japanese companies. Managed by Baillie Gifford & Co, a global asset management firm based in Edinburgh with assets under management of approximately £225 billion, this trust aims to provide capital growth by investing in stocks of Japanese companies with high growth potential.
On the 24th July 2024, Japan Trust announces that it has issued ¥ 12bn of fixed rate, senior, unsecured privately placed notes split into three tranches of ¥4bn, maturing in 5, 10 and 14 years from the funding date of 20 November 2024.
Centrus’ solution
Japan Trust has issued three tranches of privately placed Notes:
Coupons are payable semi -annually.
The proceeds of the Notes will be used to repay existing bank debt of ¥9.3 billion maturing in November 2024 and ¥2.6 billion maturing in March 2025.
Centrus acted as arranger of the issue of Notes, advising on the structure of the transaction, drafting an investor presentation and arranging meetings with a selected group of institutional investors.
Transaction outcome
This transaction provides the Japan Trust with medium-term financing at a range of maturities and a competitive weighted average interest rate of 2.05%.
The Japan Trust Board remains committed to the strategic use of borrowings for the Company in order to enhance returns to shareholders over the long term. This new financing will maintain availability of earing capacity for the Japan Trust and fixes the cost of borrowing for an extended period, providing certainty.
“Having considered various financing options, the Japan Trust board decided to access the institutional private placement market with its debut financing.
Following meetings with selected investors, Japan Trust received bids with maturities ranging from 3 to 20 years. A single investor was chosen which provided tranches of ¥4 billion with an average maturity of just under 10 years thereby achieving a blend of medium term finance and at an attractive overall cost.
The investor agreed to defer settlement until November 2024 thereby allowing Japan Trust to coordinate the closing of its new financing with the maturity of bank debt of ¥9.3 billion in November with a further ¥2.6 billion bank debt maturing in March 2025.”
Peel NRE, part of the Peel Group, is at the heart of the nation’s activity around clean energy growth and the circular economy – helping the UK achieve net zero by 2050.
Peel is one of the leading property and infrastructure investors in the UK, focused on Ports, Airports, Property and Energy.
Peel NRE is a real estate business focused on assets linked to low carbon energy generation, including energy from waste, wind farms and heat networks.
Transaction overview
Peel NRE secured a new standalone £45m senior term loan, having previously been financed by a wider Peel Group facility. The new debt is provided by HSBC and NatWest for a three-year period, plus two one-year extension options.
Centrus’ added value
Leveraging expertise across the real estate and infrastructure sectors, Centrus highlighted the infrastructure-like characteristics of the portfolio to achieve the most optimal financing terms.
Centrus prepared a financial model and comprehensive marketing materials to highlight the credit strengths of the Peel NRE transaction.
Centrus’ strong relationships with banks helped drive a competitive process and ensured the transaction was delivered smoothly.
“Centrus worked hard on this transaction to deliver a new standalone debt facility for our NRE division. Centrus led the process from end-to-end, resulting in a well-structured, cost-effective solution and providing a strong foundation for Peel NRE to grow. We look forward to working with Centrus again in the future”
Elise Mannix, Associate Director, Corporate Development – Peel Group
“Centrus is delighted to have advised the Peel Group on this new standalone financing facility for Peel NRE with HSBC and NatWest. The transaction reflects the high-quality nature of the NRE portfolio and provides a strong foundation for the future growth of the business.”
Cottsway has successfully restructured its treasury portfolio, securing £175m of new facilities and restructuring £195m of existing facilities with the help of Centrus. This comprehensive refinance delivers interest savings, harmonises covenants, and now positions Cottsway to continue meeting the high demand for social housing in its operating regions.
Transaction overview
Cottsway is a registered provider of social housing, providing over 5,700 homes for rent and shared ownership in West Oxfordshire, Gloucestershire, Wiltshire and Worcestershire. Over the last decade, these regions have experienced strong population growth, exacerbating the already significant demand for social housing, demonstrated by Cottsway’s occupancy rate of 99.3%. Cottsway work in partnership with Homes England and local authorities to fulfil such local need, and have developed over 2,000 homes since its formation.
Formed in 2001 as a LSVT (Large Scale Voluntary Transfer) from West Oxfordshire District Council, Cottsway’s outdated and expensive LSVT debt was constraining long-term ambitions and corporate flexibility.
To address these challenges, Centrus was engaged to perform a comprehensive treasury review for Cottsway. The review aimed to harmonise covenants and controls (including a transition to EBITDA only covenants) whilst also identifying opportunities to lower interest costs and ensuring sufficient facilities were in place.
Centrus devised a lender engagement plan and spearheaded negotiations with both bank and capital market lenders.
“This new funding is part a major re-finance programme for Cottsway which has allowed us to repay legacy debt and secures our corporate ambition to provide more homes in the communities we serve. We are delighted to have our new lenders alongside us and look forward to building a partnership for the future. We are also delighted to have been working with Centrus who have been a huge support.”
Richard Reynolds, Chief Executive – Cottsway
Transaction outcome
The negotiations led to a substantial restructuring and refinancing of Cottsway’s treasury portfolio. This included:
£125m of new funding, split between capital markets and bank term loans. These funds were utilised to repay existing lenders.
Restructuring £195m of existing bank facilities and private placements to improve and harmonise covenants, with a focus on transitioning to EBITDA only covenants.
Extending and increasing liquidity by £50m, ensuring sufficient facilities are in place to deliver Cottsway’s business plan.
This restructure was executed in a complex interest rate environment, requiring careful consideration of the tenor of new facilities. The refinance involved a 20-year private placement and 7-year term loan, aligning with the weighted life of the debt being refinanced. This approach avoided fixing a significant portion of Cottsway debt for a long period at a single point in time, whilst also managing medium term interest rate risk and ensuring appropriate longevity in the new portfolio.
A significant discount on prepayment was negotiated with one outgoing lender, alongside the absorption of material break costs. Additionally, the refinance addressed an expensive off market margin with a second lender which was due to increase further in 2025. These factors allowed the refinance to deliver interest savings whilst unlocking capacity and increasing corporate freedom within the new and restructured loans.
Cottsway was supported by law firms Trowers (Banking) and Devonshires (Security) throughout the process.
“The quality of advice, support and responsiveness from Centrus has been exceptional in delivering a major refinance for Cottsway involving multiple lenders and a relatively complex negotiation landscape. The Centrus team is first rate.”
Stephen Leonard, Resources Director – Cottsway
“We are delighted to have arranged these new facilities for Cottsway and to conclude the successful reshaping of their treasury portfolio. The new facilities form part of a wider refinance of legacy debt which has unlocked capacity and lowered interest costs, helping Cottsway to continue the great work that they do in their communities. It has been a pleasure to work with Cottsway throughout.“
Heylo was established in 2014 and has since grown to become one of the UK’s leading shared ownership for-profit registered providers.
Heylo engaged Centrus to conduct a comprehensive stress test review, which included an evaluation of the stress tests, the testing process, results and proposed mitigants.
Following the analysis, Centrus presented the findings to the Heylo Board, providing assurance that the stress testing adequately addressed potential risks to Heylo and incorporated appropriate mitigants.
Centrus’ solution and value add
Benchmarking and insight: Centrus’ benchmarked existing tests against best practice within the sector and recommended new and alternative tests to ensure Heylo’s testing suite provided useful insight into the business plan’s resilience under challenging yet realistic scenarios.
Analysis and comparison: Centrus assessed the effectiveness of each mitigant proposed by Heylo, including an appraisal of Heylo’s ability to implement each mitigant and a comparison to those used by other registered providers.
Engagement and accessibility: We pride ourselves on our advice accessible and took great care to ensure all key stakeholders fully understood the analysis and were comfortable endorsing the testing approach.
“We recently appointed Centrus to undertake a stress testing evaluation for our regulatory vehicle.
Not only did we find them extremely responsive and completing the work quickly, we found their level of commentary and feedback valuable and at a quality above that we had received in previous years from other providers”
Jonathan Conway, Director of Corporate Finance – Heylo Housing
For more information, please contact Lawrence Gill, Director at Centrus
The Capital Letters (CL) mission is to respond to, and address London’s homelessness crisis. Since 2019, CL has procured nearly 6,500 properties for those in need.
Centrus was engaged to assess and refine CL’s business planning model. This involved reviewing the appropriateness of existing assumptions and integrating additional functionalities to improve accuracy.
Once the model was refined, Centrus presented an overview of the business plan including the appropriateness of assumptions and conclusions drawn from the plan to CL’s Board. This provided CL’s Board with both confidence and assurance that the plan was based on Informed assumptions and driven by a best-in-class model.
Centrus’ Solution and Value Add
Modelling Expertise: enabled challenge and real assurance on technical aspects underpinning the review. Centrus assessed CL’s model, running checks to understand model functionality, accuracy and the appropriateness of the assumptions. Our team then refined the model, updating it to include integrated financial statements and stress testing capability.
Governance Support and Clear Reporting: ensured a very broad range of stakeholders could engage, debate and be assured by the process and plan outputs. This was a real value-add to strategic decision-making.
Holistic Service: Centrus was able to straddle both the technical and strategic aspects of the project to offer comprehensive advice.
“We are extremely pleased with the business planning and assurance work completed by Centrus. They leveraged their sector expertise to provide a comprehensive assessment of Capital Letters’ business plan, complete with stress testing, mitigation planning, and assurance on planning assumptions to leave us assured that our business can continue to grow on a strong foundation.
Centrus also presented their findings to our Board and ensured the proposal was clearly understood by all. Throughout this process the team have gone above and beyond and been invaluable support in our latest endeavours.”
Sue Edmonds, CEO – Capital Letters
For more information, please contact Paul Stevens, Executive Director – Centrus
Welsh Housing Partnership 2 (WHP2) is an innovative arrangement between four housing associations (HAs) in Wales: Hafod Housing, Coastal Housing Group, Grŵp Cynefin and Pobl Group. WHP2 aims to increase the provision of quality, affordable housing to people in Wales who are otherwise unable to access home ownership or social housing.
WHP2 commissioned Centrus to support the refinance process, from initial funding strategy to arranging the private placement.
The transaction was complex and completed on 31st May, seeing WHP2 refinance £68m of bank debt via a new 10 year £38m fixed rate note from the Pension Protection Fund (PPF) and a 12 year £30m fixed rate loan from the Welsh Government.
The transaction has reduced running interest costs by c.£2m per annum with the savings passed directly to the four HA partners, enabling increased investment.
Centrus Added Value
Investor Relationships: Centrus’ outstanding network of lender relationships enabled a smooth and highly efficient market engagement process with our team of advisors coordinating the development of an information memorandum (IM) and engaging with over 20 banking and institutional lending partners, ensuring WHP2 found the right partner and the best deal.
Benchmarking and Insight: Centrus’ constant market engagement and transaction track record enabled informed analysis and benchmarking of terms offered to WHP2, resulting in confident negotiations, optimising structuring and maximising value for money.
Comprehensive Service: Our support was end-to-end, with guidance and tenacity provided to unblock problems, ensure security, valuations and loan documentation were appropriately completed, and deliver assurance reporting to evaluate the transaction versus initial objectives
“Whilst the structure is by nature complex and leveraged, the refinancing now complete stabilises the WHP2 financial profile, reducing costs to the partners, whilst ensuring these homes are available for the longer term. It has been great to see PPF and Welsh Government support the partnership and recognise the value add we make to the Welsh housing sector.
We are grateful for the expertise and support of our advisors at Centrus and Devonshires whose market knowledge, investor relationships, and commitment to delivery have ensured we successfully navigate through a complex process and market. Centrus’ ability to be tenacious, focused and assist us with unblocking issues as they arose was critical to getting us over the line, whilst ensuring we had confidence in our decision-making.”
Simon Jones, Chair – Welsh Housing Partnership 2 Ltd
“Securing this refinance is a fantastic achievement for WHP2 and its members and ensures much needed affordable housing is available to those that need it in Wales.
Given the very structured and highly leveraged nature of the vehicle, delivering the funding was challenging and I’m grateful for the efforts of both my colleagues and all stakeholders involved at WHP2 alongside the flexibility and professionalism of PPF to get this deal done.
It was a pleasure for Centrus to be involved in this process and the competitive terms received for WHP’s funding needs underline both their excellent business credentials and the continued strength of investor appetite for the affordable housing sector as a whole. We look forward to continuing to work with WHP2 going forwards.”
Associated British Ports (“ABP”) owns and operates 21 ports in the United Kingdom, managing around 25 per cent of the UK’s sea-borne trade. As a vital part of the supply chains of businesses throughout the UK, the 21 ports support 200,000 jobs and contribute £15 billion to the economy every year, handling £157 billion of trade.
Transaction Overview
In April 2024, Centrus supported ABP with successful restructuring a portfolio of c.£176m swaps, as part of a continued optimisation of the company’s long-term hedging strategy.
The transaction follows on from a similar exercise undertaken in late 2023 for a portfolio of £300m swaps.
Restructuring the hedging portfolio in the elevated rates environment allowed ABP to fully remove a large proportion of swap break provisions at competitive pricing levels, and aligned the hedging portfolio with future funding plans.
Since 2017, Centrus has advised ABP on over £2bn notional of hedging transactions, and we are proud to support ABP as an extension of their treasury team.
Centrus Solution
Centrus advised ABP throughout the process, coordinating a wide ranging RfP process with the company’s bank hedge counterparties. Centrus’ market insight on the products, solutions and counterparties available to ABP helped drive through a successful restructure amidst a backdrop of significant interest rate volatility, providing independent assessment of hedging alternatives and co-ordinating strong support from ABP’s relationship banking group.
“Centrus supported us through a successful swap restructuring in which we are pleased to have achieved our risk management objectives under a continued backdrop of interest rate volatility. Centrus added value in creating a hedging strategy supported by thorough analysis, market expertise and execution support, which all facilitated a smooth transaction process which received strong support from our hedging bank counterparties. As our long-time advisor, we look forward to working with the Centrus team as we continue to optimise our long-term hedging strategy.”
Shaun Kennedy, Group Treasurer at Associated British Ports.
Centrus advises Tai Tarian on raising £95m of new bank and capital markets funding to enable full refinance of existing debt, achieving a very substantial NPV saving on future financing costs
Transaction Overview
Tai Tarian is one of the largest social landlords in Wales, with 9,000+ properties across Neath Port Talbot. Established in 2011 by large scale voluntary transfer (“LSVT”) from the local authority.
Existing syndicated bank finance reflected these LSVT roots and timing of this initial funding but no longer met the needs of a mature organisation with significant investment and growth aspirations.
Centrus undertook thorough analysis to establish the case for refinance, devised the treasury strategy and, once Board approved, was then engaged to lead on implementation.
Centrus Solution
Comprehensive treasury strategy formulation which evidenced the business case for refinancing.
Full market engagement with prospective bank and private placement funders, driving competition & optimising terms.
Refinement of strategy to reflect terms received and enable funder selection, determining the most suitable combination of bank and capital markets funding to provide interest cost management and flexibility.
Combination resulted in two new bank funders (RCF & Medium Term Loan) and one new long term private placement investor.
Added Benefits
New relationships established with three funders, on terms reflective of Tai Tarian’s high credit quality.
Achieved NPV saving in excess of £6m, through optimising the terms and funding structure.
Covenants and controls relaxed, enabling Tai Tarian to operate with maximum flexibility.
Centrus led throughout working closely with Tai Tarian and its other professional advisors to deliver a complex transaction.
Regular reporting to Executive, Task & Finish Group, and Board to ensure fully empowered and able to exercise effective governance.
“When we commissioned this work, I hadn’t appreciated just how hands on you would be on a day-to-day basis but I can now see that this is where the magic really happens and where the value is derived. It is so much more than ensuring that we get the best rate. I am so grateful for Centrus advice, support, trouble shooting, arm twisting and solutionising throughout this process. We would not have achieved the outcomes without Centrus. In the context of these reflections the Board requested that we feedback their gratitude to the Centrus team.”
Nick Tagg, Director of Finance – Tai Tarian
“It’s been an absolute pleasure to work with Linda, Nick and the Board to deliver this refinancing and establish a treasury platform reflective of a 1st class organisation with sustainability and tenant services at its heart. The case for refinancing was compelling but working together we achieved really excellent outcomes, driving down the cost of financing while ensuring operational headroom and flexibility is maximised. The future looks very bright for Tai Tarian”
Paul Stevens, Executive Director – Centrus
For more information, please contact Paul Stevens.
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