GreenSquare modernises funding mix in £0.5bn treasury restructure

Chief executive Ruth Cooke, who joined GreenSquare in May last year, described the financial overhaul as “a brilliant outcome in some of the most challenging market conditions I can remember”.

Mr Tarrant said that the timescales and constantly changing environment surrounding the transaction “made the task challenging”, but that this enabled the group to increase its liquidity on a cost-effective basis.

He said the additional £50m over a 25-year period from Blackrock also meant the group could remove a funder “who couldn’t agree to the terms we achieved with other existing and new lenders”.

Treasury rethink

GreenSquare was formed through a mix of traditional and LSVT, with a syndicated facility and loans that restrict liquidity and on-lending, which has limited development ambitions.

A partial refinancing in 2018 was done when Blackrock provided a £75m investment.

However, the new treasury structure enables its main registered providers to share security and financial support without going down the route of legal consolidation, with that option agreed for the future.

Mr Bacon said there had been a legacy book that was “not nearly as clean as it could have been”, while relationships with some of the lenders required some attention.

The covenants in LSVT provider Westlea remained “markedly different” to those for the parent company and second registered provider GreenSquare Group, and had been constraining the group’s ability to develop more homes while tying up latent capacity.

“Instead of Westlea and GreenSquare being looked at as separate entities, the combined financial performance of both can now be taken into account when we look at how we’re doing against the covenants; the new agreements mean that the key covenants are now aligned, “ said Mr Bacon.

Work with lenders saw around £350m of existing facilities transferred to the harmonised funding platform.
That included facilities with investors Blackrock and MetLife, along with banks Lloyds, NatWest, Santander and Triodos.

The break-up of a legacy syndicated facility and a switch to a set of bilateral arrangements resulted in one traditional lender leaving GreenSquare, which also meant that some swaps needed to be broken.

The all-in costs of refinancing are around £11m, partially offset by a reduction in rates across some of the facilities.

“It was worth every penny because it gives us the ability to deliver as a group and enables us to deliver the corporate plan as well,” Mr Bacon added.

The team has also left £57m across three Retail Price Index-linked lease and leaseback deals – which were completed with Aviva in 2013 and 2014 – untouched in registered subsidiary GreenSquare Community Housing. Its four non-regulated subsidiaries include GreenSquare Homes, which builds for open market sale.

A new deal

The restructure sees £140m of new revolving credit facilities (RCFs), with Barclays and Japanese bank MUFG joining the lender panel.

As part of the £115m unsecured package, there was a fully unsecured facility with MUFG, a three-month unsecured element on its Barclays RCF and a two-year unsecured period with the £50m investment from Blackrock.

The wider package also includes the association’s first ESG-linked facility with NatWest, with targets around the thermal efficiency of its existing housing stock tied into a reduction in the interest rate.

“Even during COVID-19, the banks are very keen to lend to the sector, and there have been some really good bond issues recently at amazing rates,” Mr Bacon said.

However, the COVID-19 environment did impact on some parts of the process.

There was a “slight delay” as Blackrock lined up its final cohort of investors against a volatile markets backdrop. One of the banks also held off providing an additional facility as it wants to see the impact of coronavirus on the financial plan.

In logistical terms, loan documents requiring signatures also needed to be sent to people’s homes.

Devonshires provided advice on the loan and security documentation, while Trowers & Hamlins covered property charging, carrying out due diligence on more than 6,500 properties within a short timeframe.

Addleshaw Goddard and Clarke Willmott acted for the funders. Centrus provided treasury advisory services and JLL provided valuation services.

Improvement plan

GreenSquare’s new corporate plan focuses on being a “simply brilliant” landlord, which it says extends across value for money and customer service, but also includes simplifying and enhancing its governance and financial reporting arrangements. It also covers simplifying the group structure to maximise financial capacity.

The HA’s leadership team continues to address a regulatory judgement in June 2019 that observed “a clear lack of leadership around health and safety issues” and said that the board had failed to exercise oversight or seek assurance about the effectiveness of controls in operation on health and safety.

Mr Bacon said that having a G2/V2 regulatory grade was not a barrier for lenders, who were assured by the leadership team and the continued improvement plan agreed with the regulator.

Meanwhile, the finance team continue to model the impacts of COVID-19 on the financial plan, including the development programme and tenure mix, arrears and voids, and repairs and maintenance.

He said the group enters the crisis with plenty of headroom against covenants and is a “financially strong organisation”.