Landlords shy away from rescue deals
The housing associations with the most financial muscle are being forced to turn away from floundering associations because of the price tags banks are attaching to rescue deals, Inside Housing has learned.
Affinity Sutton this week withdrew its interest in rescuing a struggling housing association, understood to be Presentation, because one of its lenders said it would mean renegotiating Affinity Sutton’s lending terms.
Chief executive Keith Exford argued that the usual housing association rescue procedure did not work in a climate where banks took every opportunity to renegotiate terms. ‘When you consider that Affinity Sutton has a debt facility of £1.2 billion, it doesn’t take a genius to work out that even a 1 per cent difference in our borrowing costs has a huge impact on our business.’
David Montague, chief executive of London & Quadrant Group, said it was time for the Tenant Services Authority and the government to put on their ‘steel toe-capped boots’.
‘If the rescue of a struggling housing association means that lending terms are repriced, that could kill the rescue market and it seems pretty short-sighted. Organisations like L&Q Group are not going to pay an increased margin as a consequence of rescuing another association.’
Andrew Heywood, deputy head of policy at the Council of Mortgage Lenders, said lending terms had to change to reflect the rising cost of funding to lenders.
A TSA spokesperson said: ‘This is a serious issue, particularly for associations seeking to merge or join group structures with financially stronger associations.’