Centrus advises Barcud on £70m post-merger sustainability linked funding

Transaction Overview

Barcud completed post-merger refinance, increasing capacity and enhancing financial resilience, with £50m sustainability linked private placement and £20m ESG linked RCF.

One of Barcud’s strategic objectives is to provide 5,000 affordable, mixed tenure, high quality sustainable homes by 2025. Barcud was formed in November 2020 following a merger between traditional and LSVT RSL’s, the first such combination in Wales.

Centrus was engaged pre-merger to develop a holistic treasury strategy for implementation post-merger, work which was then refreshed in January taking into account the actual treasury position following merger consents and the then market conditions. The strategy was essentially unchanged.

At its heart the treasury strategy was designed to simplify existing treasury arrangements, through reducing the number of lenders, maximising covenant headroom with alignment where possible and improving corporate flexibility while preserving value for Barcud, as well as reducing risk through increasing the longevity of fixed rate funding.

Centrus Solution

Having agreed the strategy, Centrus was engaged to lead on its implementation, involving negotiations with a number of existing bank lenders. Barclays was ultimately selected as the ongoing RCF provider, with ESG-linked KPIs enabling Barcud to benefit from a discount once achieved, as well as converting the facility to SONIA. Additionally, Centrus undertook full market engagement with potential investors to arrange a £50m Private Placement. The strength of Barcud and its positioning in the market resulted in 8 offers from potential investors. ASI was ultimately selected based upon its very competitive offer, including meeting the desired covenant package, in addition to agreeing Sustainability linkage with a KPI relating to EPC ratings which, when achieved, will enable Barcud to benefit from a reduced cost of funding.

The overall refinancing transaction reshapes treasury arrangements to fully support Barcud’s strategic objectives, unlocking additional investment and development capacity, while at the same time enhancing financial resilience, ensuring Barcud is well placed to deliver on the benefits arising from merger.

“Finalising this refinancing project within 9 months of merger has been a remarkable achievement for everyone involved and I would like to specifically thank Centrus for their support. We are pleased to be able to continue our excellent working relationship with Barclays Bank and look forward to working with ASI in the future. The additional funding will help Barcud achieve its strategic objective to provide 5,000 affordable, sustainable homes by 2025.”

Kate Curran, Group Director of Finance & ICT – Barcud

“It’s been a pleasure working with the Executive & Board of Barcud to successfully implement the treasury strategy, achieving outcomes which have exceeded objectives agreed as part of the business case. Barcud is now better placed to achieve its growth ambitions, with a stronger treasury platform underpinning investment decisions as well as maximising the benefits of sustainability-ESG linkage.”

Paul Stevens, Managing Director – Centrus

For more information, please contact paul.stevens@centrusadvisors.com

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