Anchor Hanover makes loan book unsecured, signing £300m SLL as it preps for capital markets

Replacing the previous £265m syndicated RCF with the new unsecured SLL is therefore the first stage of a strategy that will see Anchor Hanover move towards “longer-term funding with more of an emphasis on the debt capital markets as well”, Ms Jones said.

While the group does not have firm plans on when it will issue its debut bond, Ms Jones said that the group sees itself as being in the “best possible position” to do so when the time is right, in terms of having available the security released from its RCF.

The bond is also likely to be a sustainability bond, with Anchor Hanover currently creating a framework that will allow it to issue on this basis, aligned with the work it has done on the SLL.

Ms Jones said that in establishing its sustainability framework, it was important to create something which reflected the organisation’s specific strategy and ambition, including the “four mores”.

“You’re already starting to see references to ‘sector norm’ and ‘standard for the sector’, and we thought we’re just not in that place. We really wanted this to reflect Anchor Hanover,” Ms Jones said.

The framework needed to be suitable for recognising the positive impacts particular to Anchor Hanover as a specialist older people’s housing organisation, which in many cases relate to the avoidance of a negative – for example, avoiding trips or falls that might lead to acute hospital admission.

“What we were able to agree with NAB and our partner banks was that we could measure, particularly on diversity and well-being, lives positively affected. So that was really positive because it doesn’t create a dysfunction and a focus on driving a particular outcome for a small cohort; it actually expands our ambition to understand all of the ways that we can drive initiatives throughout the organisation that will improve diversity and improve well-being for customers, and to monitor that in terms of the lives positively affected by those programmes that we put in place,” Ms Jones said.

The sustainability metrics for the loan are accredited through a second-party opinion provider, DNV GL, which is also working on the provider’s wider sustainability financing framework.

First credit rating

Alongside the restructuring, the group has gained an A+ credit rating from Standard & Poor’s, with stable outlook, marking its first as a merged entity.

Legacy organisation Anchor was unrated, while Hanover’s previous A2 rating from Moody’s was withdrawn following the merger.

As an organisation focused on housing and care services for older people, applying for a credit rating during a global pandemic made for interesting timing, Ms Jones said.

“We were absolutely delighted to get the A+ rating and particularly the ‘stable’ [outlook] as well in the context, and it’s testament to colleagues in the organisation, right from the frontline and back into central support, that we were able to do that,” she said.

Asked whether the past year has shifted the balance of where risk in the organisation might be perceived to be, Ms Jones said: “I think certainly in terms of the housing side of the business, we’ve seen that what is clear is we’ve got less exposure than perhaps some general needs providers in terms of residents’ exposure to the workplace. The majority of our residents are over pension age, so that makes a difference in terms of that profile.”

Anchor Hanover was one of several housing associations to access the Bank of England’s Covid Corporate Financing Facility, selling £140m of commercial paper to the institution last year. This has now been repaid, but is unconnected to the recent refinance.

Unsecured borrowing

Meanwhile, pursuing unsecured borrowing for the organisation has been a long-term goal for Ms Jones, who joined Anchor Hanover in 2014 from the private sector, including time spent in retail and private equity. Ms Jones said that back then she was struck by the lending terms seen in social housing. “The extent to which a sector which, no pun intended, is ‘safe as houses’ was offering layers and layers of protection, so security and covenants and all of those other obligations – the contrast from where I’d been to coming into this sector was quite stark.” 

Describing the recent request to lenders to go unsecured as a “big ask”, Ms Jones said: “I’d  say there was probably a big intake of breath at the beginning, but then everybody got on board and has worked collegiately to deliver a great outcome.” 

As to the costs associated with the refinance and the move to unsecured, the exercise has been positive from a net present value (NPV) perspective, Ms Jones said. “[Driven] by historically low rates, that enabled us to break our existing arrangements and still come out with a positive NPV.”

Anchor Hanover was supported in the latest refinancing activity by Centrus as funding advisor, and Eversheds Sutherland as legal advisor. Addleshaw Goddard was the funders’ legal advisor.

While the majority of bank lending continues to be secured, more and more instances of unsecured loans are coming to the fore. In 2019, Social Housing reported that Sovereign had struck a landmark £250m, three-year unsecured deal with a club of five lenders, including MUFG, NAB, NatWest, Lloyds and Sumitomo Mitsui Banking Corporation. 

Recent sector entrants First Abu Dhabi and Goldman Sachs have also signed unsecured loans in the sector.