Watford housing association completes £200m refinancing
Watford Community Housing has completed a £200m refinancing that increases its financial capacity and removes its stock transfer agreements.
The 12-month process has seen Watford’s funding facilities increase from £145m to £200m, including through a £65m private placement with M&G and a £30m loan from Affordable Housing Finance.
It sees Barclays – which originally provided the £145m facility that enabled the stock transfer in 2007 – reduce its exposure to £100m of term loans and revolving credit facilities. Barclays also arranged the private placement.
Watford Community Housing was formed through a large-scale voluntary transfer in 2007, supported by a £145m loan from Barclays which required standard terms such as bank business plan approval and agreed peak debt levels.
The new deal means additional debt capacity, supporting the association in its business plan aspiration to have built 1,000 new homes by 2020.
Paul Richmond, director of finance and resources, said the deal “gives us the additional capacity we need to develop much-needed affordable homes for our local community and beyond”.
“This refinancing deal gives us a range of facilities for the group which is more appropriate for our financial ambitions. The overall refinance deal represents excellent value for Watford Community Housing.”
The group’s standalone swaps were left intact. At the year to March 2017, Watford said it had hedged £57m into fixed rate through the use of interest rate swaps.
Mr Richmond told Social Housing that part of the driver was flexibility and diversifying the lender pool.
He said that the previous £145m was the association’s peak debt level, so “we had to cut our cloth accordingly”.
The new funding arrangements mean it can ramp up development while ensuring there is enough liquidity in the business to support its ambitions.
The housing association is increasing its delivery of homes both directly and through joint ventures, most notably with Watford Borough Council (Hart Homes) and Three Rivers District Council (Three Rivers Homes).
Mr Richmond said the new arrangements fit with the joint venture activity, with the “appropriate amount of on-lending” capacity and on-lending limits.
“Clearly that was a key focus for us: that we could guarantee a deal that gave us headroom in that regard,” he added.
Mr Richmond said part of the message around the JVs is that Watford is long term and focused for the most part on affordable housing or temporary accommodation. It means it is “not exposed to the market in the same way as market sale”, and offers potential for growth and a steady cashflow.
He also pointed out that the JVs are with local authority partners that are strong counterparties in their own right.
Andy Taylor, director at Barclays Corporate Banking, said: “We have a strong and long-standing relationship with Watford Community Housing, and for Barclays to support the next stage of their evolution through arranging the private placement and restructuring the existing bank debt facility provided the funding solution Watford Community Housing’s business plan required, and underlines our ongoing commitment to the social housing sector in the UK.”
The housing association was advised by JCRA and Devonshires.
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