Metropolitan Housing £300m Long Term Bank Loan Portfolio Restructuring
Centrus was appointed by Metropolitan Housing on a review of its loan portfolio and the potential impact of changes in accounting treatment of debt instruments and standalone derivatives. The process included evaluating and commenting on all funding and hedging agreements and sensitivity analysis on the potential financial statement volatility arising from its “ineffective” and non-vanilla standalone swaps. Subsequently we provided restructuring strategies for the group’s derivatives portfolio to mitigate the accounting volatility exposure alongside the potential costs of implementing these options. Centrus was able to negotiate a material and economically beneficial maturity extension to the loans which considerably mitigated Metropolitan’s refinancing risk. In addition, Centrus worked with Metropolitan to execute a complex trade of c.£200m involving very long dated non-vanilla derivatives. This transaction involved portfolio re-profiling, cancellable option unwinding and partial embedding of stand-alone swaps into existing bank loans. Throughout the process, Centrus was able to add considerable value in negotiating with the counterparty across a range of complex and interrelated issues while providing pricing transparency to Metropolitan in order to support its decision making process.