Wulvern secures £216m through placement, council loan and bank debt

The unique deal includes a £35m private placement at an undisclosed rate that matures in 2046 and a 25-year, £60m loan from Warrington Council, which is also a strategic partner of the HA via a local enterprise partnership (LEP).

The deal has also seen the refinancing of the syndicated loan facility that enabled the group’s initial stock transfer in 2003, including paying down some legacy debt to Newcastle Bulding Society and leaving Royal Bank of Scotland - which also arranged the private placement - holding the majority of the remaining bank finance.

Wulvern, which manages more than 5,300 homes in Crewe, Nantwich and the surrounding villages, said the ‘unique deal’, combined with grant funding, will allow it to develop more than 1,000 new affordable homes by March 2018, including for rent and shared ownership.

Along with current plans to deliver around 450 homes, the group has a forward development programme of 640 homes and has been allocated £14.8m by the Homes and Communities Agency under the 2015-18 programme.

Deputy chief executive Sasha Deepwell said the three-way structure was a strategy ‘approved by our board to spread investment risk and achieve penetration into the debt capital markets’.

She added: ‘It builds relationships for the future which will allow Wulvern to access a healthy range of future finance should it be required for additional growth.’

Ms Deepwell said the group has a ‘plain and simple’ development strategy, with a focus on social and affordable homes.

Private placement

Ms Deepwell told Social Housing that the private placement route comes with covenants, but also flexibility and a long-term ‘one-to-one relationship’ where the investor ‘really gets to know the business’.

The cost of the £35m of funds, which mature in 2046 and were agreed with a single investor, has not been revealed. Security cover is charged at EUV-SH levels.

While assessing options, the deputy CEO said investors were attracted to the opportunity for growth in the Cheshire area, seen as the ‘south east of the north west’.

Council loan

Wulvern already has a strategic relationship with Warrington Council via the Cheshire and Warrington Local Enterprise Partnership (LEP), which was awarded £142.7m in funding from the government’s £2billion Local Growth Fund.

The rate of the £60m loan is linked to the Public Works Loan Board (PWLB) and can be taken as fixed or floating, with drawdowns any time after 5 years. It does not carry any non-utilisation fees and comes with ‘standard’ asset cover levels.

Diane Jones, Wulvern’s executive director for finance and risk, said: ‘It’s a very different product and they are more strategic partners in terms of what they lend the money for.’  

Warrington Council has previously lent over £150m to HAs, including £90m to Helena Partnerships and £20m to Plus Dane earlier in 2014, which followed loans to Muir Group, Your Housing, Warrington HA and Golden Gates Housing.

The loan to Muir Group in May 2013 was over a 25-year term, with the option for 20 draw-downs staggered over six years. Interest payable was reportedly 1.25 per cent above the PWLB’s rate at the date of each drawdown.

Bank debt

An original £60m syndicated facility was provided by RBS and Newcastle Building Society at the time of the stock transfer, but has been repeatedly increased to reach £153m.

Ms Deepwell said the banks have been ‘really helpful’ on the three previous occasions that they extended the facility, but that the term of the bank debt and the level of exposure to Wulvern led the group to look at alternative routes.

She added that 11 years on from the transfer, it is ‘time to start putting ourselves on a more traditional HA footing’.

Negotiations took place around repaying legacy debt while also freeing up business plan covenants and opening the group up to new funders, to ‘secure the future for Wulvern to develop and grow’.

RBS now holds the majority of the bank debt.

Newcastle BS - which has stated that it is looking to wind down its HA book and return to traditional focus on mortgages - remains in the syndicate.

Clive Barnett, head of housing finance at RBS, said: ‘We are delighted to have been able to play a major role in the restructuring exercise and in turn support Wulvern Housing’s ambitious development programme
and help them provide over 1,000 new affordable homes for rent and shared ownership across Cheshire.’