North Wales Housing completes major refinancing with first Welsh investment by Scottish Widows

Transaction Overview

Advised by Centrus, North Wales Housing has today finalised the refinancing of its £35m banking portfolio via three new bi-lateral facilities totalling £62m.

Founded in 1974, North Wales Housing today is a successful and ambitious social enterprise that provides homes and services to over 2,500 households across North Wales with ambitions to deliver a further 250 new homes over five years.

With completion of this transaction four of the five legacy banking relationships have been refinanced in full via a new £39m long-term fixed rate loan from Scottish Widows, of which £10m is deferred by two years. Principality Building Society has been retained via an extended and increased £5m ten-year term loan, with liquidity and day to day banking provided by Lloyds who have also extended a new £18m five-year RCF.

The loan from Scottish Widows, which represents the investor’s first entry into the Welsh social housing sector, has a blended weighted average life of 21 years and a coupon comfortably below 3%. The deferred tranche has been structured back to back with a maturing THFC advance, reducing refinance risk and locking in funding from the currently attractive debt markets.

Despite the incurrence of break costs to exit the legacy bank loans, the refinance will tangibly reduce North Wales’ running interest costs which paired with optimisation of other covenants has resulted in increased financial resilience and overall development capacity.

This was a complex refinancing with numerous stakeholders involved and its successful completion places North Wales in a robust and well capitalised position to deliver the organisation’s ambitious corporate objectives.

Centrus acted as sole financial advisor to North Wales, with Devonshires acting as legal advisor.

“The North Wales Housing Board set a number of strategic aims which included raising new finance to pursue our development program, the simplification of the loan portfolio, reduction of interest costs and removal of onerous covenants which were restricting the growth of the organisation. With the help of our financial advisor Centrus, we delivered against these aims and can now focus our efforts on developing affordable homes across North Wales. We were impressed by our funders’ commitment to the Social Housing sector and, in particular, welcome Scottish Widows to Wales.”

Jayne Owen, Finance and Resources – Director of North Wales

“Centrus has worked with North Wales Housing over the last twelve months to structure and deliver this exciting transaction which sees Scottish Widows’ entry into the Welsh sector for the first time. The reshaped portfolio now has fewer lenders, increased longevity, stable fixed/floating ratios, and lower cost of carry, despite the increase in overall facilities, and will underpin North Wales’ future ambitions.”

John Tattersall, Director – Centrus

“We are pleased to be supporting North Wales Housing’s strategic plan of delivering much needed new affordable housing in the region and have been able to provide a tailored long-term funding solution that meets the requirements of both parties.

This transaction is a further investment for Scottish Widows in UK social housing, our first social housing investment in Wales and demonstrates our experience in and commitment to this nationally important sector.”

Gavin Reid, Associate Director – Scottish Widows

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