Japan's biggest bank looks to build 'long-term relationships' with HAs

Bank of Tokyo-Mitsubishi UFJ (BTMU) - part of Mitsubishi UFJ Financial Group (MUFG) - has provided a £75m facility to 27,000-home older people’s housing organisation, Anchor Trust, as part of a £265m syndicated revolving credit facility (RCF) led by Barclays and also including Santander.

As well as providing part of the loan, MUFG is acting as one of the mandated lead arrangers for the seven-year RCF, which Anchor will use for financing potential acquisitions, development and general corporate purposes.

MUFG is one of the world’s leading financial groups with total assets of more than $2.4 trillion as of March 31, 2015.

The bank is looking to make direct loans to HAs of between £30m and £75m, and is focusing primarily on the larger associations in England. It looks to work within regular and existing covenants.

Robert Bartlett, executive director for infrastructure at MUFG, said the Anchor deal ‘represents an important milestone as our very first social housing client and sets the stage for growing a new portfolio as part of the overall MUFG strategy’.

The bank is offering a number of lending products comprising five to 10 years secured lending through term loans or RCFs, along with ancillary services such as transaction banking, derivatives and capital market solutions.

Asked whether the new entrant may consider buying an existing loan book from another bank, Mr Bartlett said there were no plans.

‘The priority at the moment is to build relationships with key housing associations…and to establish long-term lending relationships,’ he said.

However, he drew on the group’s activity in the project finance field, giving the example of MUFG’s acquisition of loans and related assets worth approximately £3.3bn from RBS, consisting primarily of natural resources, power and other infrastructure assets in Europe, the Middle East and Africa (EMEA).

Mr Bartlett also pointed out that the group lends over the longer-term on other structures, such as private finance initiative (PFI) and public-private partnership deals, but added there is no plan to extend the maturity term for social housing at present.

He said the bank has a long history of funding other UK social infrastructure projects through project and structured finance. Bank of Tokyo has been investing in PFI in the UK for a number of years, in both big scale infrastructure and social infrastructure, including schools and hospitals.

He said: ‘Moving into the social housing sector is a logical progression and matches our own ethos of corporate social responsibility, both in our lending policies and in our commitment to contributing to the communities in which we operate.’

MUFG also has extensive experience in the international debt capital markets (DCM). The bank already works across 50 countries at present.

Mr Bartlett said the bank - which has 1,200 people in its London office, including 85 in the structured finance team - started to look at the social housing sector in 2013 and has spent two years meeting stakeholders, from associations to lawyers to the regulator, as it formed an internal risk framework.

Some of the key factors that form that framework include focusing on associations which manage a sizeable number of units, have a strong financial performance and high governance and viability ratings, he said. Unlike some existing lenders to the sector that have been providing funding since before the credit crunch, there are also no ‘legacy issues’ with debt that is ‘not making the required return’, Mr Bartlett said.

Sarah Jones, Anchor Trust’s finance director, said the Japanese bank had been interested in getting involved in UK social housing for some time.

Although Anchor and the banks began negotiations before the July Budget and completed the deal afterwards, Ms Jones said the terms of the deal remained the same throughout.

She said: ‘The profile we wanted was quite unusual for a housing association because we wanted a seven-year revolver and not all banks would support seven years. Revolving facilities would tend to be about five years.’

She added the organisation is in the first year of a five-year plan, so the profile of its borrowing lends itself to a seven-year term.