First Abu Dhabi Bank enters UK social housing

News08 Aug 2019Luke Cross

The United Arab Emirates’ biggest lender First Abu Dhabi Bank (FAB) has entered UK social housing.

Global funders continue to arrive in UK social housing

Sharelines

The UAE’s biggest lender First Abu Dhabi Bank has entered UK social housing, marking another major global bank coming into #ukhousing after recent arrivals from Australia, Japan and the US #socialhousingfinance

Bank FAB has completed its first deal with a UK housing association via an unsecured loan to 44,000-home provider Optivo.

The three-year, £50m revolving credit facility forms part of a wider £200m financing by the London G15 housing association that also includes BNP Paribas and Barclays, supporting its “100 per cent affordable housing pipeline” of 4,850 new homes over the next three years.

Bank FAB’s emergence marks the latest overseas bank to find its way to UK social housing, opening the sector up to another new region following the likes of National Australia Bank (NAB), Japanese banks Mitsubishi UFJ Financial Group (MUFG) and Sumitomo Mitsui Banking Corporation (SMBC), and US banks such as Goldman Sachs and Wells Fargo, which revealed to Social Housing that it is looking to enter the sector.

The deal comes weeks after Goldman Sachs entered the social housing lending landscape with a £50m unsecured loan to Places for People.

Tim Luckhurst, executive director of First Abu Dhabi Bank UK, said: “FAB UK is delighted to partner with Optivo to support their efforts to deliver new homes over the next three years, as well as assisting their residents into work and training.

“We are committed to being a responsible company by conducting our business in the way that balances people, profit and social conscience.”

FAB is over a third-owned by the UAE government, with a London branch authorised by the Prudential Regulation Authority.

It was created through the merger of two leading UAE banks – FAB and First Gulf Bank – in April 2017, and boasts the strongest combined credit ratings of any bank in the Middle East and North Africa (MENA) region, at Aa3/AA-/AA- with stable outlooks.

Its website says it offers an “extensive range of market-leading conventional and Islamic products and services through our business segments”.

Principal customers in its UK corporate and investment banking division – which provided the loan to Optivo – are “investment grade, mainly publicly listed in core industries such as aerospace/defence, [financial institutions], oil and gas and related service sector, and active in the MENA region”.

The bank offers bilateral loans and syndications, trade finance via letters of credit, bonds and guarantees and project finance.

Meanwhile, it says its principal customers in its personal banking are “high net worth with a MENA background” and businesses in property investment and development in the UK that focus on the London residential and commercial real estate markets.

From a global banking perspective, the bank also offers money market instruments, FX spot and forwards swaps, interest rate swaps and bonds.

“When you’re borrowing from any overseas investor, one of the first questions we want to make sure the board has understood is who is bearing the currency risk and are you borrowing in sterling or are you borrowing [in a foreign currency] and then swapping and putting a hedge in place to manage the currency risk?

“We would always feel much more comfortable with them borrowing in sterling and leaving the currency risk with the lender, which I think is generally how the [North] American private placement market has operated.”

He added: “In terms of borrowing from the Middle East specifically, then clearly individual borrowers will need to take their own view on counter-party risk. We would want boards to have thought through any issues associated with their lenders, and manage whatever risks flow from that.”

He said treasury is “definitely a key area of interest for us, even though we don’t have direct control any more” following deregulation measures in 2008.

Lender appetite

The latest run of new entrants follows a record £4.5bn of borrowing in the months leading up to the original planned Brexit date in March.

July then saw the return of large-scale club loan deals to the sector, which included unsecured lending.

Social Housing revealed that Sovereign had completed a groundbreaking three-year £250m unsecured revolving credit facility with five lenders as it looks to mitigate market volatility and support plans for a move to more land-led development.

The syndicate is led by NatWest and includes Lloyds, MUFG, National Australia Bank and SMBC.

The sector’s Japanese banks, MUFG and SMBC, have both told Social Housing that they can provide unsecured lending in the sector.

Goldman Sachs, which has acted as arranger on a handful of housing association bonds, provided its unsecured loan to Places for People, while also raising €150m from new-to-sector European investors.