AIB and One’s £45 million, three-year facility reflects a wider trend
Lenders push short-term deals
The credit crunch has led banks to offer an increasing number of short-term loans to housing associations, although interest in long-term investment remains strong.
Last week Allied Irish Bank revealed it had agreed a £45 million, three-year extendible revolving credit facility with One Housing Group. The bank said the move was consistent with its appetite for risk in the sector.
The lender said an increasing number of housing associations were keen to diversify their financing strategies, which included the use of short-term credit facilities.
Gerry Jones, corporate manager at Allied Irish Bank, said: ‘Corporate borrowers typically carry a range of debt maturities and shorter deals can be consistent with registered social landlords’ operating cashflows.’
Martin Heys, group finance director at One Housing Group, said the facility was attractive because it included the option of making the deal longer term if this suited both parties.
He said: ‘This is a different form of finance to what has generally been adopted in the sector, which has tended to be long-term facilities and it complements the general portfolio of what the group already has.’
Heys said housing associations had tended to lock into long-term deals to ‘negate the refinancing risk’, but said One Housing Group wanted a mix of agreements because market conditions could change quickly.
The money will go towards One’s development programme but has yet to be earmarked for specific projects.
Discussing the financing of the sector at its board meeting last month, the Tenant Services Authority said dialogue with a number of lending institutions indicated a ‘preference among lenders for shorter maturities’.
It stressed that the availability of longer-term funding had improved in recent months, however.
Research conducted in October by consultancy Tribal for Inside Housing also suggested that lenders would be more keen to offer short-term loans because of the Financial Services Authority’s capital adequacy requirements, which require them to put cash aside to cover potential losses on loans.
Tribal agreed with the Tenant Services Authority that interest in the sector by long-term investors had ‘greatly increased’ in the past few months.
In numbers
£45 million
Allied Irish Bank loan with One Housing Group
Three years
Deal has been secured on a three-year extendible basis
One year
The loan can roll for a year after the second year of the deal, which gives the association a year to refinance
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