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Tuesday 16 October 2018

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Hyde completes £760m corporate financing restructure

Posted on 15 November 2017

The Hyde Group has completed the final phase of its current finance strategy. Hyde Housing Association, its parent entity, has undertaken a £760m corporate refinancing involving five banks, which gives it a modern and flexible financial framework. The move, in combination with the raising of £575m of new group liquidity earlier this year, reinforces Hyde’s financial status and ensures its five-year development programme is entirely funded with a healthy buffer held in reserve.  

The refinancing will:

  • See the establishment of up to £150m of new loan facilities, being an increase in facilities from £1.95bn to £2.1bn overall. Hyde will also benefit from some term loans becoming revolving, creating £325m of overall additional revolving facilities, an average weighted life of 19 years and only £103m of loans maturing in the next three years
  • Enhance the further expansion of the housing association’s Common Terms Arrangements across the vast majority of its banking relationships putting each on an equal footing
  • Complete the implementation of a new standardised covenant package that reflects the appropriate and strong asset value and income generating capacity of Hyde rather than the previously more historical focus on grants
  • Facilitate the c.£173m closing out or restructuring of a material proportion of the association’s derivative positions at an attractive discount. The estimated net impact of break costs and mark-to-market movements this financial year is c.£27m. This derivatives change will result in a c.0.2% p.a. reduction to Hyde’s cost of capital to below 5%, simplifying and reducing the volatility of its hedging portfolio and allowing for the release of £120m of property security. Crucially, it will allow the Hyde Group to better capture the historically low long-term interest rates existing today and which were already seen in the Group’s £400m bond issue earlier this year.

“This financial restructuring exercise completes our financial vision that we set out at the beginning of the year and provides an already-strong Hyde with even greater resilience against any future economic or property market downturn. We now have very little maturing debt over the next three years, a fully funded development programme and approaching half a billion pounds in the bank,” said Hyde Group Finance Director, Peter Denton.

“Although already in good shape, our finances are now up-to-date and more straight-forward. We have a fit for purpose banking structure and are possibly in the best shape in our 50-year history to fulfil our strategic objectives – to do more than our share to alleviate the housing crisis in London and the South East.”

The restructuring exercise follows hot on the heels of the Group’s successful £400m 35 year 3% coupon Martlet Homes bond issue in May 2017 and brings the total of bond and bank finance raised/restructured by the Hyde Group this year to £1.3bn.