Contingency plans put in place in case rescue merger falls through
Troubled Cosmopolitan’s future hangs in balance
Cosmopolitan Housing Group could face the possibility of insolvency if its proposed merger with Riverside does not go ahead.
Sources close to the deal warn that an alternative merger partner is unlikely to be found if Riverside opts out of the rescue.
As a result, the Homes and Communities Agency has put in place contingency plans if the merger falls through. These include the potential to instigate a ‘moratorium’ for Cosmopolitan, which would allow the housing regulator 28 days to negotiate a last-ditch deal with lenders before the troubled housing association defaulted on its loans.
At least two other housing associations examined the possibility of a tie-up with Cosmopolitan after financial difficulties at the 14,000-landlord came to light over the summer. However, it is understood that 54,000-home Riverside is the only association to have tabled an offer.
The deal is now largely dependent on the two associations’ lenders agreeing not to impose crippling interest rate hikes on existing loans. Cosmopolitan and Riverside have been meeting the banks this week in an attempt to thrash out a deal as quickly as possible.
Matthew Bailes, director of regulation at the HCA, confirmed that the regulator has been examining scenarios for Cosmopolitan if the merger falls through.
‘We have contingency plans in place,’ said Mr Bailes. ‘It’s not as simple as saying that if the Riverside deal doesn’t happen that’s it.’
‘Of course we plan on the basis that there are all sorts of possibilities. From our contingency plans, a moratorium may well be one of those.’
Any agreement would still need the approval of both associations’ boards before going ahead.
Meanwhile, details have emerged of the measures put in place by Cosmopolitan over the summer as part of a voluntary undertaking drawn up by the regulator. These include the appointment of four co-optee board members and of former interim chief executive of troubled Metropolitan Peter Cleland as an independent advisor, acting as de facto interim finance director.