SMBC signs £110m in deals including second sustainability-linked loan
Japanese bank Sumitomo Mitsui Banking Corporation (SMBC) has agreed loans with two UK housing associations totalling £110m, including a deal that marks its second sustainability-linked loan (SLL) to the sector.
SMBC, headquartered in Japan, has agreed two loans to UK HAs (picture: Getty)
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The five-year, £50m revolving credit facility (RCF) provided to Catalyst Housing also marks the first SLL for the housing association. As with SMBC’s first sector SLL – a £100m RCF to Clarion in December – the loan has a margin tied to social impact indicators.
In the latest SLL, the metrics relate to the work of Catalyst Communities, the housing association’s community investment division, which manages a range of projects including youth mentoring schemes and employment and apprenticeship programmes in London and South East England.
The division’s ‘income maximisation’ team assists customers into part-time or full-time work, including through vocational training, as well as supporting others to claim the benefits they are entitled to.
If Catalyst meets pre-agreed targets to assist customers with maximising income, it will pay a lower interest rate on its debt to SMBC. Outcomes will be reported in Catalyst’s annual accounts.
The metrics are designed to address two of the United Nation’s ‘Sustainable Development Goals’, namely ‘no poverty’ and ‘decent work and economic growth’.
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Catalyst will use the loan, which has bullet repayment, for general funding purposes.
Commenting on the deal, Michaela Booth, director of corporate finance at Catalyst, said: “At Catalyst our investment in our communities is a key part of staying true to our social purpose.
“Our Catalyst Communities team help our customers with income maximisation through finding decent employment aiming to mitigate the risk of poverty. This new funding from SMBC fits perfectly with our commitment to investing in our communities.”
A growing number of housing associations and banks have now signed up to loan facilities with interest rates linked to environmental, social and governance metrics, with Bromford and NatWest becoming the first to sign one pegged to energy efficiency, in February.
The latest deal with Catalyst, signed on 24 February, brings the total value of known SLLs in the sector to £575m, across six associations and four lenders.
Midland Heart
In a second recently announced deal, SMBC has provided a £60m RCF to association Midland Heart. The deal, which is not linked to sustainability metrics, has an initial five-year term with an option to extend.
It follows the affirmation of the Birmingham-headquartered provider’s A1 stable credit rating from Moody’s in November, and an increase in operating surplus to £77.1m for the 2018/19 year, compared with £47.8m in 2018.
Anna Simpson, executive director of finance and resources at Midland Heart, said: “We’re thrilled to have retained our A1 stable rating and secured this finance from SMBC, which will fund the development of high-quality affordable housing across the Midlands.
“As a not-for-profit organisation that stays true to our social purpose of providing genuinely affordable homes, it’s very important that we can borrow on the best possible terms and give our customers good value.
“It’s encouraging that both Moody’s and our new financial partner SMBC recognise the value of affordable housing as a product to invest in.”
Legal advice for Catalyst’s loan was from Trowers & Hamlins, with funder’s valuation from Savills and funder’s legal advice from Addleshaw Goddard.
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