Hampshire association refinances debt and gets £10m to spend on new works
A Hampshire-based housing association stands to save a "six-figure" sum on its borrowing after agreeing a groundbreaking £100m deal.

The deal, £65m of which comes from the Royal Bank of Canada with the balance made up by Barclays, gives Hermitage Housing Association cheaper loan rates and lower fees.

The unusual element of the deal is that the £65m chunk from the Royal Bank of Canada can be converted into bonds if Hermitage wants. This is one of the first uses of such an arrangement.

The money will be used to refinance £90m of existing loans with Royal Bank of Scotland, Halifax and Nationwide. This leaves £10m to be spent on development and repairs.

Judi Ammari, chair of Hermitage, said: "The savings generated will enable us to accelerate our housing maintenance programme and add to our development programme.

"We have made great progress recently in improving our stock and successfully bidding for new development projects, and we are now able to provide suitable funding to achieve them."

The savings will enable us to accelerate our maintenance programme and add to our development programme

Judi Ammari, Hermitage Housing Association

Hermitage is part of Parchment Housing Group, which negotiated the deal on its behalf. The group last year became part of the Guinness Trust, retaining its autonomy but centralising and sharing some services.

This is the first deal that Barclays has undertaken with Royal Bank of Canada and the banks' first mixing traditional loans with the option to convert to bonds.

Tony Norman, relationship manager for Barclays, said more housing associations might need to embrace the capital markets.

He said: "Registered social landlords in future will need to tap the debt capital markets [bonds] to help sustain their debt capacity because the bank finance market is relatively thin and you don't have many big banks playing. Over the next three to four years, they may find that banks don't want to be overexposed to the social housing sector."

John Shinton, director of capital markets at Royal Bank of Canada said: "This package enables clients to get the best of the available funding from both capital markets and the traditional banking sectors.''

Source

Housing Today