First Priority to strike deal with creditors

The CVA, which allows insolvent companies to continue trading with a view to returning money to creditors, is the first the sector has seen, Social Housing understands.

FPHA has two creditors remaining out of an original five – Equitix, and its largest lender Hentop Investments. Its other creditors – Civitas, Funding Affordable Homes (FAH) and Supported Living Infrastructure – have all transferred their properties elsewhere.

Supported Living Infrastructure’s creditor, Gravis Capital Management, said last week that Supported Living Infrastructure had transferred its stock away from FPHA.

FPHA obtained a moratorium on insolvency proceedings on 22 June while it considered setting up a CVA with its creditors, according to Companies House.

This followed a review by the Regulator of Social Housing (RSH) into FPHA’s financial position and its governance. It said the fact the board was dependent on the goodwill of its lease counterparties in relation to rent payments “indicates a fundamental failure of governance”.

FPHA, which had 26 landlord counterparties across 227 properties, with 759 tenancies in place in February – had a £738,000 gap between its assets and current liabilities, according to the accounts that were filed with Companies House.

The total number of leases transferred away from FPHA is now 100, leaving it with 127 properties.

FPHA’s 2017 accounts, filed in May, showed that its liabilities exceeded its assets by £788,858 and cast doubt on its ability to continue as a going concern.

A person close to the CVA told Social Housing that the arrangement had been agreed, and two other people close to the matter have confirmed that this is also their understanding. One person said the CVA is likely to be formally announced later this week.

A spokesperson for FPHA told Social Housing on Friday that the CVA had not yet been officially approved, and “it would be inappropriate for us to provide a running commentary while the process is still underway”.

FPHA said on Monday that the CVA had still not been approved.

It is understood that Supported Living Infrastructure and FAH agreed to vote in favour of a CVA to get a swift return of the leases FPHA holds on their properties.

Supported Living Infrastructure last week transferred all 24 of its leases to Bespoke Supportive Tenancies, which provides social housing to vulnerable adults, according to Gravis Capital.

FAH transferred 32 leases late last month to its own registered provider and is understood to be reaching an agreement with 11 care providers.

CVAs tend to last between six months and one year but can run for longer, depending on the terms of any given arrangement.

Civitas, a real estate investment trust that had 44 leases with FPHA, transferred them earlier this year after concerns were raised by the regulator, which issued FPHA with a regulatory notice over its financial position and governance.

Jonathan Walters, deputy director for performance and strategy at the RSH, told Social Housing that should a CVA be agreed, it would represent a good outcome for tenants.

“Our priority has always been keeping tenants in their houses in the regulated sector.”

“It is for landlords to determine if they are still getting value for money from their leases,” he added.

If FPHA was forced into insolvency by its creditors the regulator would have had tools to deal with the fallout, said Mr Walters.

“But our view is it is always better if the landlord and creditor can sort these things out between themselves.”

The RSH last week gained new insolvency powers that enable it to seek the consent of the secretary of state for housing to place insolvent registered providers (RPs) under administration.

Update: the CVA was formally approved on Thursday (19 May).