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Hyde completes £760m refinancing amid downgrade dispute
Hyde has completed a £760m corporate refinancing and hit back at the social housing regulator’s decision to downgrade it.
The move from the London housing association will establish up to £150m of new loan facilities, bringing Hyde’s total available facilities to £2.1bn. A total £325m of revolving facilities will also be added.
Five banks were involved in the process, and Hyde will have to pay out £173m to close out or restructure some of its derivative positions. This change, according to Hyde, will simplify the association’s hedging portfolio, and allow it to take better advantage of the current low interest rates.
However, partly as a result, the Homes and Communities Agency (HCA) has downgraded the association’s financial viability rating from V1 to V2 this morning.
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Its judgement noted: “As a consequence of a large and diverse development programme, Hyde is facing a range of risks and increased exposure to sales. Hyde’s financial forecast demonstrates a material financing requirement.
“It is currently in the process of restructuring its loan portfolio, which is expected to bring long-term benefits and reduce treasury management risk. In 2018, however, this change results in one-off charges that it is not able to meet from the surplus on its in-year operating activities.”
Peter Denton, group finance director at Hyde, told Inside Housing that this was true, but that the HCA was using the wrong metric to judge its financial viability, as it was not intending to use its operating surplus to pay off its closing costs. He called the fact “slightly irrelevant”, as it was being funded by bank facilities.
Mr Denton added: “After this, I don’t have any real maturing debt in the next three years. I’ve got £2.1bn facilities and hundreds and hundreds of millions of cushion beyond what we need for the development programme, and I’ve got a covenant package and a liquidity profile that allow me to undertake a very material downward stress.”
The aim of the refinancing is to provide Hyde with the financial capability not only to fund its extensive development programme, but also to provide the association with a financial cushion in case of any future economic downturn.
