Tuesday, 28 March 2017

Takeover boosted by news that lending group will not reprice loans

Cosmopolitan merger moves one step closer

A rescue deal for troubled Cosmopolitan Housing Group has moved closer after it emerged a leading lender would not change loan terms if it merges with Riverside.

Sources close to the talks are hopeful the merger could be concluded before Christmas, although negotiations hang partly on whether the two landlords’ lenders opt to reprice existing loans.

It is understood that one of the main groups of lenders to Chester & District Housing Trust, which became part of the wider Cosmopolitan group through a merger in December 2011, will not reprice its £104 million of loans. The club of lenders is led by Lloyds Banking Group.

However, it is not known whether the banks that lent to Cosmopolitan prior to last year’s merger will seek to reprice. This group is thought to include Barclays, Newcastle Building Society and Santander.

In its last set of accounts before the CDHT merger, Cosmopolitan listed £95 million of debt, with around £59 million of that figure being bank loans.

The tie-up is believed to also be dependent on lenders choosing not to renegotiate the terms of Riverside’s loan book. Although the 54,000-home landlord has bank loans totalling more than three times the size of Cosmopolitan’s, it is not yet known whether the prospect of a merger would be enough to prompt repricing.

Riverside’s 2011/12 accounts show that it has £604 million of bank debt as part of a total loan book of £702 million.

Both associations declined to comment on the latest developments beyond confirming that talks with lenders on both sides were ongoing.

One source familiar with the situation said repricing was ‘just one of the factors’ involved in the talks.

‘There is a lot of complexity there and some of the deals have got to be untangled,’ added the source.

Financial difficulty at Cosmopolitan came to light as it emerged that the 14,000-home landlord was in danger of breaching lending agreements. The problems are understood to have revolved around financing deals for its student housing business. The Homes and Communities Agency has put in place contingency plans if the merger falls through.

In numbers: Cosmopolitan

  • £702 million - Riverside’s total debt, including £605 million of bank loans
  • £95 million - Cosmopolitan Housing Group’s total debt at end of 2010/11 (before Chester & District Housing Trust merger)
  • £104 million - CDHT’s debt at end of 2010/11 (before Cosmopolitan merger)

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