Case Studies
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Centrus advises Sovereign on £250m unsecured credit facility to fund ambitious plans

An ambitious and growing Housing Association, Sovereign has significant debt requirements to meet its development programme over the next five years. Centrus helped Sovereign to develop a corporate finance strategy that focuses on reshaping its portfolio in readiness for continued capital markets access over the coming years.

As a result of this strategy Sovereign has entered into a ground-breaking three-year £250m unsecured revolving credit facility, syndicated across five lenders. This deal will provide the 58,000-home HA with financial security through a potentially uncertain political and economic period.

Centrus assessed Sovereign’s current treasury portfolio and identified a potential Tier 1 banking group that could offer Sovereign the lending capacity and ancillary services required. The new approach would require a more “corporate” approach to the management of banking relationships, with Sovereign able to shape its treasury portfolio to serve its needs whilst working constructively with key lenders so they are able to continue providing balance sheet and DCM support.

Given Sovereign’s large development programme and ongoing liquidity requirements, Centrus advised that a bridge facility would not present good value for money and instead recommended an innovative solution: an unsecured RCF with extension options to five years. This provided immediate liquidity for Sovereign with no requirement to secure a facility that is unlikely to be drawn. The unsecured RCF was structured as a club deal with five lenders each taking £50m.

This is Sovereign’s first unsecured borrowing and one of the first major unsecured bank facilities in the sector. In parallel to the new RCF process, Centrus negotiated a restructure of an existing facility in order to release significant capacity under Sovereign’s gearing covenants.

Barry Nethercott, Sovereign’s Chief Financial Officer, said: We have an ambitious strategy, to take control and build more affordable homes, to invest more in our existing properties and communities, and to become leaders in customer service. To achieve this we need the fast and flexible access to finance offered by this new deal in order to keep building much-needed affordable homes through potentially uncertain times ahead.

The deal was arranged by Centrus, who negotiated on Sovereign’s behalf.

Phil Jenkins, Managing Director of Centrus, said: We were very pleased to work with Sovereign to deliver this exciting and innovative transaction which delivers large scale, unsecured bank facilities on competitive terms. The facility includes a new lender as Sovereign continues to widen its banking group on attractive terms and provides flexibility and a strong platform from which to approach the debt capital markets.

Services provided were:

  • Loan portfolio valuation and analysis
  • Corporate finance strategy advice and reporting
  • Regular Board and Committee reporting
  • Existing facility negotiation and restructure
  • Running a competitive debt raising process with new and existing lenders
  • Negotiation of heads of terms
  • Overall structuring of innovative unsecured RCF club deal