Centrus arranges new funding for Cottsway

Transaction summary

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Formed in 2001 as a LSVT (Large Scale Voluntary Transfer) from West Oxfordshire District Council, Cottsway’s outdated and expensive LSVT debt was constraining long-term ambitions and corporate flexibility.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:

1. £125m of new funding, split between capital markets and bank term loans. These funds were utilised to repay existing lenders.
2. Restructuring £195m of existing bank facilities and private placements to improve and harmonise covenants, with a focus on transitioning to EBITDA only covenants.
3. 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.“

Tom Archer, Assistant Director – Centrus

For more information please contact Tom Archer.

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