Fortis and Waterloo keep 'two-track' treasury approach after merger
Waterloo Housing and Fortis Living will continue to operate under separate funding structures following the completion of their merger earlier this month.
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The two Midlands landlords have combined to create Platform Housing Group but will operate as distinct treasury vehicles and continue to have individual arrangements with their funders.
Andy Howarth, who had been finance director at Fortis Living before taking on the same role for Platform, told Social Housing that the tie-up was intended to use “the simplest governance structure we could come up with”.
The structure replicates that used when Fortis Living was created in 2014 through the merger of Festival Housing and Worcester Community Housing, when both entities initially operated under their new parent company.
Both Waterloo and Fortis were among the debut borrowers from The Housing Finance Corporation’s (THFC) recent £250m bond issue through its new aggregation vehicle, Blend Funding. The associations took £110m and £70m respectively.
As a result of the impending merger, Moody’s placed its initial A2 rating of the bond issue under review.
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The credit ratings agency has since confirmed the rating as A2 and stable.
“We knew we needed to raise money in the short term so we raised money as individual organisations,” explained Mr Howarth, when asked why the associations went to the market pre-merger.
“Two entities have independent loan agreements with their funders; there will be a two-track treasury management system, but we will have a combined treasury strategy,” he added.
“So there will be individual loan arrangements with Fortis and Waterloo [but] it’s for the group to decide what its strategy will be.”
The addition of new funding from Blend brings the proportion of capital market-backed funding to 25 per cent of the group’s facilities, Mr Howarth said.
The new organisation owns and manages around 45,000 homes in the Midlands and central England. It has a development pipeline of more than 18,000 homes over the next 10 years and has said the merger will allow it to build 500 more each year than it could have managed as separate entities.
Mr Howarth said one of Platform’s ambitions is to become a strategic partner for Homes England.
The group has a combined turnover of £230m, based on its two legacy associations’ most recent accounts, and a headcount of around 1,200 staff.
It is likely that other organisations will join the new group in the future.
Mr Howarth said the group structure would allow it to generate savings in a number of areas.
“We are expecting to make some savings,” he confirmed. “Coming together gives us scale and we are expecting to raise money more efficiently. We also expect savings from maintenance activity.”
The group hopes to be able to “continue to raise funds at the best possible rates, made possible by our combined financial strength,” to support its development ambitions, Mr Howarth said.
“We are very pleased with Moody’s analysis of the credit quality of the Platform Group, which has given Blend the A2 stable rating,” he added. “Together with THFC’s experience we have launched a new funding vehicle that will be of enormous value to the sector.”
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