Monmouthshire Housing Association (MHA) has struck an £85m deal to refinance its entire loan portfolio, securing £65m from the Pension Protection Fund (PPF) in its first direct investment into the UK social housing sector.

The PPF’s funding is for 40 years and sits alongside £20m of flexible finance provided by existing lender Barclays.

The funding package, delivered with advice from Savills Financial Consultants, allows MHA to release significant financial capacity, giving a substantial boost to its ambitious development programme.

The deal – which has attracted one of the lowest all-in interest rates through a private placement for a UK housing association in the past 12 months – also supports the delivery of MHA’s wider Environmental, Social and Governance (ESG) aims.

As well as increasing affordable housing provision, the 4,000-home, stock transfer landlord is committed to a range of ESG targets – including cutting carbon by a further 10% by 2024 and helping 30 tenants into work each year. The PPF and Barclays are both keen to support these important goals as part of their own responsible investment priorities.

John Keegan, Chief Executive of MHA, said:

“We are delighted to have concluded this important deal with our funding partners to support our delivery for tenants. It is especially pleasing to be working with the Pension Protection Fund on its first direct placement in the UK social housing sector.

“The PPF’s investment ethos aligns closely with our commitment to Environmental, Social and Governance (ESG) principles, and the new facilities will enable us to deliver on our exciting vision of transforming lives through enabling the communities we serve to realise their personal ambitions. The fact that the PPF has invested £65m with a 40-year maturity demonstrates the confidence it has in MHA and in our future strategic direction.”

John added: “The new funding has simplified our legacy treasury portfolio and we are grateful to Barclays for its continued support as our long-standing partner. The new structure provides increased capacity and liquidity, along with improved covenants, giving us a strong platform on which to deliver our corporate plan and bold growth ambitions.”

Barry Kenneth, the PPF’s Chief Investment Officer, said:

“Our long-term investment in MHA is a unique deal for us and secures long-term sustainable returns which enables us to deliver on our financial commitments to our members. It also showcases our in-house expertise and capabilities in portfolio management and origination, which provides a greater degree of control over our portfolio and enhances post-fee returns.

“We see strong alignment between this investment and our Responsible Investment strategy in creating positive social and environmental outcomes. We’re pleased that our investment will support MHA’s continued focus on providing affordable housing to meet the growing needs of its local community, alongside the wider environmental and social benefits of this program.”

Richard Whittaker, Relationship Director at Barclays, said:

“We are very pleased to be able to continue supporting our longstanding client Monmouthshire Housing through the provision of a new revolving credit facility. We look forward to continuing to work closely with the team at MHA to help this ambitious housing association achieve its objectives.”

Alex Morgan, Director at Savills Financial Consultants, said:

“This very successful transaction has been delivered through a period of significant economic and political volatility. We are very pleased to have been able to support MHA in delivering a complete refinancing of its loan book, and in introducing the PPF to the housing sector for its first direct deal.

“Despite the ongoing pandemic and the associated complications, we have worked very constructively with MHA, the PPF, Barclays and Trowers & Hamlins to ensure the funding package provides a high level of flexibility, including £15m of the funding being deferred for three years.”

Melanie Comer, Partner at Trowers & Hamlins LLP, said:

“We are very pleased to have supported MHA in achieving this fantastic result, supporting its delivery for tenants and its future development programme. To complete on this project in challenging times and to support MHA's goal in building more homes and delivering real social value is an achievement that we are extremely proud of. We look forward to seeing how the project develops.”

Adrian Shippey, Associate Director at Savills Housing Valuation, said:

“We undertook a detailed review of MHA’s stock portfolio, to identify the most suitable schemes and titles for valuation purposes. Our analytical approach to the valuation significantly enhanced MHA’s borrowing capacity. Working closely with the legal teams has helped reduced the number of schemes needed to fulfil the loan requirements.”

Deal information:

Funders: The Pension Protection Fund (£65m private placement); Barclays (£20m revolving credit facility)

MHA’s Financial Advisor: Savills Financial Consultants

MHA’s Legal Advisor: Trowers & Hamlins

Funder Legal: Addleshaw Goddard

Valuer: Savills