Trustee gives Swan breathing space over £250m bond

In a response to Swan’s update, M&G said it is “currently not minded” to serve notices around the terms of the bond agreement relating to possible breaches, to “enable sufficient time for the merger to take effect”. 

However, it added: “M&G and its advisors will continue to monitor developments in respect of the breaches and the Sanctuary merger and will reassess this position in light of any adverse developments.” 

Swan is facing a race against time to complete its tie-up with 105,000-home Sanctuary. The aim is to complete the deal by the end of next month. 

Last week’s update revealed that Swan currently has £24.3m in cash, which it said is “sufficient” to fund its subsidiaries until early December.

It also said it is in dialogue with its main bank lenders to maintain an effective “standstill” position over “anticipated breaches of its loan covenants, including the late filing of audited accounts”.

The update also showed that Swan was lent £40m by fellow housing association Orbit during the course of their merger talks. The proposed tie-up between Swan and Orbit was abandoned last month, with Sanctuary immediately stepping in.

S&P downgraded Swan to a BB- rating last week, because of concerns about its financial position. The credit rating agency said it did not believe Swan would remain a “viable business” without external support. 

In a statement last week, Swan said it was aware that the developments could be “unsettling” for its customers and stakeholders. However, it said the merger with Sanctuary was “proceeding at pace”, with both parties working towards a deadline of 30 November.