Archives: Credential

Transaction Overview

Last month North Star Housing Group (“North Star”) completed its long-held ambition to consolidate the Group’s legal structure and refinanced existing debt facilities via its first private placements.

Based in the North East of England North Star provides affordable housing, invests in its communities and develops new homes across the Tees Valley, North Yorkshire and County Durham. The restructure and refinance will help North Star develop 600 new homes over the next eight years, adding to the current stock of just under 4,000 units owned and managed by the organisation, placing North Star in a strong position for the future.

Three Registered Provider’s (“RP”), Teesdale Housing Association, Darlington Housing Association, and North Star Housing Group (the previous parent RP) have transferred their engagements into Endeavour Housing Association, which has been re-branded North Star Housing Group. The resulting single RP is more financially resilient whilst benefiting from much simplified operations and governance.

The new funding, which was provided by Pension Insurance Corporation and Aberdeen Standard Investments, sees £110m, of which £10m is deferred by 24 months, raised via two notes comprising separate maturities with a weighted average life of c. 36 years, an attractive covenant package and all-in coupon. The £100m spot element of this funding has refinanced North Star’s treasury portfolio concurrent consolidation which sees five banks fully repaid with hedging break costs of c. £6m incurred. The £10m deferred funding, supported by a refreshed £25m RCF, fully funds North Star’s development ambition for at least the next five years.

North Star’s resulting treasury portfolio now has a lower weighted average cost of capital, is simpler to manage, benefits from more favourable covenants, makes better of use security, and increases North Star’s borrowing capacity. The revised treasury structure also benefits from a much enhanced risk profile with the weighted average life of the portfolio increased by 23 years, and the hedged debt ratio increased to c. 100%.

This was a complex transaction completed during a period of significant economic uncertainty that nonetheless managed to take advantage of a window of stability to access low long-term interest rates. This provides North Star with a robust long-term financial platform from which to deliver its vision for the future.

“The completion of the treasury and group restructure is an important milestone for North Star Housing Group. We have a clear strategy to both invest in our existing assets and develop new homes. Delivering on our treasury strategy in these highly uncertain times has been a real achievement for North Star Housing Group and we look forward to delivering our ambitious plans for the future. We would like to thank Centrus and Trowers & Hamlins for their expertise, advice and support on this project.”

James Walder, Executive Director of Finance & Business Support – North Star Housing Group

“North Star Housing Group has had its sights set on a simplified group structure for some time. Delivering this concurrent with a transformative refinancing programme in a period of relative market volatility reflects North Star’s strong financial metrics, clear vision, and unwavering focus on success, but has yielded significant value through a materially de-risked treasury structure and very attractive long term funding costs. This transaction underlines the continued attractions of the capital markets for borrowers, like North Star, with solid financial fundamentals and a strong and counter cyclical profile.”

John Tattersall, Director – Centrus

Centrus acted as sole financial advisor to North Star, working with management to develop strategy, supporting implementation, and arranging the private placement. Trowers & Hamlins advised on the legal financing aspects, including the property security elements which will underpin the new financing arrangements and governance elements linked to the consolidation of the group.

Cadwyn Housing Association completed its first institutional private placement, finalising a £67m refinance that provides strong financial foundation to support delivery of 500 new homes and tackle homelessness in Cardiff and surrounding regions.

Cadwyn own and manage approximately 2,000 homes and recently celebrated 50 years as a community housing association in the heart of Cardiff.  This funding will see the organisation increase their stock by over 25% in the next five years, helping to achieve their vision of thriving communities through building homes and opportunities.

£41m, of which £15m is deferred over 18 months, has been raised via a single note with a weighted average life of 30 years and a coupon comfortably below 3%.  The note, which was Westbourne’s first such investment in social housing, completes the refinance of Cadwyn’s treasury portfolio which was saw 3 bank lenders refinanced and Barclays restructure legacy facilities into a new £21m RCF and £5m term loan.

The resulting portfolio is simpler to manage, benefits from relaxed covenants and increased borrowing capacity, whilst the WAL has been increased by 13 years, fixed / floating ratios have been increased to c90% and will be held there for the next five years, and the WACC reduced.

This was a complex transaction with a number of departing funders completed during a period of significant economic uncertainty that nonetheless managed to take advantage of a window of stability to access extremely low long-term interest rates to provide a robust longterm financial platform for Cadwyn.

Centrus acted as sole financial advisor to Cadwyn and worked with management to develop strategy and supported implementation including arranging the private placement. Devonshires advised on the legal financing aspects and Clarke Wilmot advised on the property security elements.

“As the new Chief Executive I am delighted to build on the successes of Cadwyn and to continue to provide excellent quality homes and build communities through partnership and innovation.  This funding will take Cadwyn forward into our next phase of development and we thank Centrus for their excellent support.”

Kath Palmer, Chief Executive – Cadwyn

“The new funding structure empowers Cadwyn to invest in new homes from a position of strength whilst creating long term financial resilience. This outcome has been possible because of the hard work and support of Centrus who guided us from strategy through to financial close. I have been continually impressed by Centrus’ skill, expertise, organisation and good humour under pressure. I look forward to continuing to work with them in the future.”

Samantha Daniel, Director of Finance & Resources – Cadwyn

For more information, contact John Tattersall, Senior Director – Centrus

Overview

Following the successful completion of these transactions, Family Housing is now able to move forward from a position of enhanced strength, supporting Welsh Government’s aspiration of creating more affordable housing, with its own ambitious plans to build 700 new homes.

Family Housing is a diverse organisation with just under 3,000 properties. It manages both general needs, supported housing and extra care schemes. It covers five local authority areas including the Swansea Bay City Region.

Centrus Solution

Centrus was engaged to undertake a treasury and funding review, guiding Family Housing towards the optimal strategy to restructure existing finance and hedging with Barclays Bank and to attract new finance from Principality Building Society and GB Social Housing.

The successful implementation has substantially increased growth and investment capacity, created a more diversified funder base having established new relationships with flexible and pragmatic institutions, achieved a more balanced approach to fixed/floating rate debt with options to undertake further hedging in the future and mitigated refinance risk. Overall, the transactions have resulted in a robust and flexible treasury platform which will enable Family Housing to pursue its growth ambitions.

This engagement presented an unusual set of challenges, not least the existing financing position and closure of the transactions in highly volatile market conditions arising from the Covid-19 pandemic. Family Housing was able to exercise effective governance throughout, supported by clear analysis from Centrus and our conviction led advice.

“We established a clear set of objectives of what we wanted to achieve, and Centrus provided first class support throughout the project, enabling us to find a solution which unlocked previous financial constraints. The joint working of the Board and Leadership Team was great to see, and I look forward to the next stage of our journey.”

Marcia Sinfield, Chief Executive – Family Housing Association

“I am delighted that we have been able to complete these transactions. The current climate required a real strength of nerve and clarity of decision making. We now have in place a financing structure and balance sheet which allows us to concentrate on our ambitious plans for growth.”

Jackie Royall, Chair – Family Housing Association

For more information, please contact london@centrusadvisors.com

Home Group, one of the UK’s largest housing associations, has successfully sold in May 2020 £100m retained bonds in a deal which saw the lowest interest rate that the Group has ever achieved in a long-term fixed rate transaction. This funding forms a key part of the Group’s long-term financing strategy and will further support Home Group’s aim to build homes for social and affordable rent, together with supported housing.

Centrus provided treasury advice to Home Group, including advice on the initial £350m bond issue, over the course of 18 months. Centrus worked with Home Group to analyse cashflow forecast and identify the most favourable financing source. This involved carefully monitoring market conditions, reviewing potential funding options (including a forward sale of the retained bonds, bilateral placement with specific investors or a typical syndicated process) and identifying a window of opportunity. The 23-year bond, at an effective fixed rate of 2.311%, is one of the lowest overall rates achieved in recent comparable housing association transactions and the lowest in the Group’s history.

“This is a really great deal and we are delighted. Not only does this reaffirm Home Group’s strength as an organisation but it’s very good to know that investors see us as a safe and secure investment at times of wider uncertainty.”

John Hudson, Chief Financial Officer – Home Group

“This is the second capital markets transaction since the start of 2019 where Centrus have advised Home Group, after they advised also on the bridge-to-bond bank facilities in late 2018. We very much value the advice, guidance and constructive challenge provided by Jon, Lawrence and the wider Centrus team as we seek effective financing solutions to support our strategic goals.”

Steve Hallowell, Director of Treasury & IR – HomeGroup

“This successful transaction is a good example of effective decision making and governance in a fast-moving environment; we believe that it supports Home Group’s financial resilience and capacity.”

Jonathan Clarke, Managing Director – Centrus

Transaction Overview

GreenSquare Group is an innovative provider of over 12,000 affordable homes across Wiltshire, Oxfordshire, and Gloucestershire with ambition to deliver more than 1,500 homes over the next 3 years. With a history tracing back to 1866, the current group structure comprising two primary RPs, formed with the partnership in 2008 of Oxford Citizens Housing Association and Westlea Housing Association (an LSVT).

Centrus was appointed as Treasury Advisor by GreenSquare to work with Board, Treasury Committee, and Management to develop a corporate finance strategy and ultimately deliver the comprehensive restructure that sought enhanced financial resilience, flexibility, and capacity to deliver new homes.

Centrus Solution

The innovative transaction delivered creates a global treasury structure enabling unfettered sharing of security and financial support between the primary RPs without necessitating legal consolidation, albeit that option has been obtained for the future. £350m of existing facilities were restructured with existing funders, including the legacy LSVT arrangements in Westlea, to deliver harmonised covenants, controls, and security arrangements across the group.

Added Benefits

Accessible gearing and security capacity has been doubled, financial arrangements have been simplified, whilst tangible value in legacy facilities has been retained. £50m of funding was refinanced via the capital markets and £140m of additional liquidity was procured from new and existing funders. The resulting structure, completed within five months, yields a broad, resilient, liquid financial profile to empower GreenSquare to deliver its core strategic objectives.

“Centrus provided invaluable support to GreenSquare throughout the series of inter-linked transactions. The advice provided assisted all strata of the organisation; from delivery of the strategy to Boards and Committees through to negotiation of documentation alongside the treasury team.

The timescales and constantly changing environment surrounding the transaction, made the task challenging. Centrus’ input into the process greatly assisted in the delivery of a funding structure which is not only fit for purpose now, but scalable for the future and will enable GreenSquare to deliver on its corporate objectives to provide homes for new and existing customers.”

James Tarrant, Head of Corporate Finance & Treasury – GreenSquare

Your Housing Group finalised its first institutional Private Placements, bolstering liquidity and cementing a broader restructure of Treasury arrangements to support a ten-year growth strategy.

Warrington-based Your Housing Group is a leading provider of affordable homes across the North West, Yorkshire, and Midlands. Providing over 28,000 homes, the Group has a clear long-term strategic vision to deliver high quality homes efficiently, effectively, and innovatively.

£120m has been raised via two notes comprising four maturities with a weighted average life of c. 34 years, a coupon of c. 2.5%, and an attractive covenant package despite volatile market conditions.

The transaction follows a significant restructure of banking relationships completed in December 2019 that established a ten-year £250m Revolving Credit Facility across three core banks, removed EBITDA-MRI based interest cover covenants, and provided significant liquidity. The new funding arrangements underpin a ten-year strategy that will see significant investment into existing assets and unlock development of more than 10,000 new homes across a range of rent tenures, placing Your Housing Group in a strong position for the future.

Centrus acted as sole financial advisor to Your Housing Group, supported Treasury strategy development and implementation, and arranged the private placements. Devonshires advised on the corporate and financing aspects, including the property security elements which will underpin the new financing arrangements.

“The completion of these new facilities is an important milestone for Your Housing Group. We have a clear strategy to both invest in our existing assets, and develop at scale to deliver new homes. Delivering on our Treasury strategy in these highly uncertain times has been a real achievement for Your Housing Group, and we are looking forward to implementing the next stage of our plans.”

Jeremy Earnshaw, Chief Financial Officer – Your Housing Group

“Your Housing Group has a very clear vision to deliver the social impact that this transaction and the underlying banking restructure unlock. The combination of this vision and strong financial metrics have been instrumental in delivering this transaction despite recent market volatility, with the coupon underlining the continued attraction of the housing sector for long term investors seeking stable and low risk investments.”

John Tattersall, Director – Centrus