Trident Group secures £75m private placement as it prepares for growth

News19 Jun 2020Sarah Williams

Midlands-based housing provider Trident Group has secured £75m funding in a private placement with Pension Insurance Corporation (PIC).

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Midlands-based housing association @tridentgrp secures £75m private placement with @PensionCorp as it prepares to fuel new-build growth #ukhousing #socialhousingfinance

The deal, which completed on Monday (15 June), was achieved at a fixed rate "well below business plan assumptions", the group said.

The funds will be received by registered provider (RP) Trident Housing Association and are split into two equal tranches with terms of 31 and 33 years.

The 3,400-home provider, which offers services including care and support, will use the money to refinance existing borrowing as well as increase its liquidity to support growth.

The deal is further testament to the private markets reopening to housing associations, following an earlier flurry of housing association activity in the public markets at the end of March.

On Monday, Social Housing reported that fellow Midlands provider Bromford had locked in current favourable rates in a £100m deferred private placement with Legal & General. A month earlier, on 12 May, 28,000-home Your Housing completed the second of two private placements with UK investors, totalling £120m at less than 2.5 per cent.

Simon Hatchman, executive director of resources at PA Housing, who is a board member and audit and assurance committee chair for Trident, told Social Housing the completion of the deal with PIC followed “good, positive dialogue” with the investor as the COVID-19 pandemic unfolded.

“It’s a good deal for Trident; obviously, it’s also a good deal for the investor concerned; and I think it’s decent evidence that the appetite is still out there to get these transactions over the line. So, for us, it’s pleasing to be part of that story,” he said.

Mr Hatchman, who joined Trident’s board in July 2018, said the deal was a “key staging post” in the provider’s plans for future growth and a further boost to its financial resilience.

It builds upon previous work that saw the provider regain its top G1 rating in September 2017 after addressing some previous reporting issues. The group also has a top V1 rating for viability.

Mr Hatchman said: “As part of that wider work [on governance], the board at the time took the decision to step back from new development to a large extent and just focus on the core business, to get the building blocks in place.

“One of the final pieces of that jigsaw was around the financing and funding that Trident would then need to take the business support onto the next level in terms of having capacity to restart that development programme at a more significant level.”

The group’s 2019-2024 business plan assumes a committed development programme of 20 affordable rented units in 2021/22, following no new build in the 2020 financial year. The group is keen to retain its focus on core product, Mr Hatchman said, with primarily rented accommodation with the potential for some shared ownership, as well as new build supported housing.

Weighing up options

Last year, Trident worked with sole treasury advisor Savills Financial Consultants to weigh up its potential options. These included refinancing some legacy debt, with a focus on covenants and increasing asset efficiency.

“[We wanted] to make sure that we had as much capacity as possible to make a contribution towards the national push for new build and increasing the housing supply,” Mr Hatchman said.

He added: “A private placement with an investor seemed the best fit in terms of giving us long-term fixed-rate debt at a price that was well below our business plan assumptions, so represented good value for money, fitted well within our financial profile, and also allowed us to refinance some of the legacy debt in order to improve that asset efficiency.”

Trident decided in December to work with PIC, with legal and security work continuing in early 2020 as the COVID-19 pandemic started to bite.

Despite the wider market disruption, the deal was affected only by a “slight delay to the pricing decision”, with a potentially beneficial impact overall, Mr Hatchman said. “The all-in price is probably slightly better than we would have achieved [three or four months ago] because of the way the market then moved, because the gilt yields have reduced.”

The deal completes the current stage of Trident’s refinancing.

Mr Hatchman said: “The financing we’ve put in place now will see us through the foreseeable future, so there are no immediate plans to go back to the market again in the short-term. It really depends on how the development pipeline grows from here.”

Trident may benefit from further growth opportunities as part of the Matrix Housing Partnership, a consortium of nine housing associations and councils that is a strategic partner with Homes England.

Interim group finance director John Nixon, who joined the group in October 2019, said the deal was “a good fit” for Trident as well as the investor. “It’s given us in the order of £15m-£20m of additional funds, but has also enabled us to look at the residential loans that we had and the residual stock for the next round of refinancing, which would be in about 2023.”

Sean Escott, director at Savills Financial Consultants, said: “This is a significant step forward for Trident, allowing them to move away from a reliance on bank funding and secure long-term funding from long-term investors on a direct basis. It has allowed legacy loans to be repaid, which has released additional security to enable Trident to plan for further growth.”

The RP’s legal advisor was Winckworth Sherwood, with funders’ valuation from JLL and funders’ legal advice from Addleshaw Goddard. Prudential is the security trustee.