We are pleased to announce that Newport City Homes (“NCH”) has successfully completed a major refinancing of its treasury portfolio, with support from a range of stakeholders.
As the third largest city in Wales, home to more than 150,000 people, Newport has undergone significant regeneration over the past 20 years. The city, which sits along the M4 corridor between Cardiff and Bristol, has delivered strong economic growth in recent years, with Newport exhibiting the highest level of house price growth across the UK in 2018. These factors have increased both demand for housing in Newport but also affordability concerns.
Since its formation in 2009, NCH has played a significant role in the regeneration of Newport city and today is the largest provider of social housing stock in the city, providing homes and services to more than 20,000 residents.
A private placement with one of the lowest all-in interest rates ever achieved in the sector was used, agented on a sole basis by NatWest Markets and supported by leading corporate finance advisor, Centrus.
Centrus supported NCH through formulating and implementing the strategy, designed to refinance expensive debt facilities which were put in place at the time of stock transfer. These previous facilities were structured on typical Large Scale Voluntary Transfer (“LSVT”) terms.
But with a now well-established track record for delivery, it was time to remove the restrictive covenants and business plan controls and enable NCH to achieve its growth ambitions. The full refinance means NCH has significantly reduced its ongoing funding costs and diversified its sources of funding.
The £95m private placement from Legal & General Investment Management Real Assets (LGIM Real Assets) was used to repay a syndicated facility between three lenders. The private placement additionally benefits from fit-for-purpose covenants, providing long-term interest rate protection with at a very attractive coupon and average weighted maturity.
Future liquidity is catered for by new five-year and ten-year revolving credit facilities totalling £30m with attractive terms, resetting the relationships with two long standing banks, Barclays and NatWest.
NCH has now laid a treasury foundation suitable to support its 2020 vision and beyond, enabling the establishment of a development programme of around 250 homes per annum.
Commenting on the transaction Ceri Doyle, Chief Executive of NCH, said: “The decision to refinance is never taken lightly, it was important to NCH that we worked with advisers and agents who understood our purpose and ambition. Centrus, NatWest Markets, Trowers & Hamlins and Savills perfectly fitted this bill. The deal enables NCH to fulfil our potential, supporting and sustaining our existing communities and delivering much needed new housing in south east Wales.”
Tim Jackson, Executive Director of Finance, added: “We are extremely pleased with the price, covenant structure and other terms in the package of refinancing deals, which will support NCH’s drive to fulfil its potential, supporting and building sustainable communities in south east Wales. All our advisers were part of the team from the outset and provided us with excellent support and guidance throughout the whole process. This deal is testament to their commitment to achieve the right funding package for NCH.”
Paul Stevens, Managing Director at Centrus said: “NCH achieved a tremendous result which will greatly contribute to its ability to make a step change to the delivery of much needed housing and support for the people of Newport. Centrus appreciated the opportunity to showcase its holistic end-to-end offering, providing independent advice which assisted NCH in the development of the refinancing strategy, lender negotiations, debt raising & structuring, and execution of hedge breakage.”
NatWest Markets arranged the private placement and George Flynn, Vice President commenting on the result said: “We are delighted to have supported NCH with its debut private placement transaction. This transaction demonstrates the value of a competitive, syndicated and targeted approach to market. This financing provides long-term and cost-effective way to help fund NCH’s development programme”
Steve Bolton, Investment Manager, LGIM Real Assets, said: “NCH are an important regional provider who play a major role in fulfilling affordable housing needs in South Wales. This is a significant investment for Legal & General’s Private Credit team, and further demonstrates both our commitment to housing in the UK, and our on-going support to organisations that make a positive impact on the communities they serve. Having recently signed the UK’s largest bulk annuity transfer
– a £4.6bn Pension Risk Transfer with Rolls-Royce Pension Fund, this investment is ideally suited for annuity money. Legal & General is uniquely placed to invest pension money into the UK economy, and our investment in Newport City Homes matches our extended liabilities and delivers both real economic growth and social value for the UK.”
Law firm Trowers & Hamlins advised on all legal aspects of the project. The team was led by partner Neil Waller, who said: "We are very pleased to have played our part in achieving this fantastic result for NCH, demonstrating once again our commitment to support our Welsh housing clients on large scale refinancing projects".
Savills provided security valuations. Nigel Williams, a Director in the Affordable Housing Valuations Team at Savills, said: “We are proud to have been part of this key milestone in the history of NCH. Savills provided valuation advice to all three lenders, including LGIM for its private placement. This approach allowed us to ensure the most effective split of the stock for security purposes between the lenders.”