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Two housing associations increase liquidity via Bank of England COVID-19 scheme
Two housing associations have sold short-term debt worth a combined £450m to the Bank of England through its emergency liquidity facility aimed at helping businesses through the coronavirus crisis.
Data released by the bank on Thursday showed that London-based landlords L&Q and Optivo had utilised the Covid Corporate Financing Facility (CCFF) scheme to increase liquidity in response to pressures imposed by the COVID-19 pandemic.
L&Q sold £300m of short-term debt in the form of commercial paper and Optivo sold £150m.
In total the Bank of England bought £16bn in commercial paper from 152 businesses including household names such as John Lewis, EasyJet, Burberry and Marks & Spencer.
Only large housing associations with V1 gradings for financial viability from the Regulator of Social Housing – the highest possible grade – were eligible for the scheme.
Tom Paul, director of treasury and commercial at Optivo, said: “Having access to the scheme bolsters our already strong short-term liquidity to nearly £800m, underlining the resilience of our business through this period.
“We’d have enough to cover our whole committed development programme with or without CCFF.”
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He noted that being part of the scheme allowed the 45,000-home association to pay down revolving credit facilities (RCFs) for the time being.
He added: “This is helping us save interest expense – even though our RCFs remain fully committed and in place. It’s also helping our banks to manage their own funding positions as the policy is intended to do.”
The group recently posted its unaudited financial results for 2019/20 which showed that its surplus had fallen by a third, while L&Q’s results showed that its bottom line had stabilised following a significant drop in 2018/19.
L&Q, which owns and manages 95,000 homes, said accessing the fund had allowed the business to increase its liquidity to £800m.
A spokesperson for L&Q said: “As a material contributor to the UK economy, L&Q took the strategic decision to use the CCFF as a way of further preserving cash and providing additional cover for unforeseen events, not already considered or factored in to our planning, relating to the pandemic.
“More uncertainty and tough decisions may lay ahead, but we are confident in the strength of our governance and finances, the talent of our people and the flexibility of our business to adapt to change.”
The scheme was set up in April alongside the relaunching of the bank’s Corporate Bond Purchase Scheme, for which 14 registered providers are eligible.
