Three things I learned from our biggest refinancing deal ever
By Ian Skipp, Group Director of Finance & Resources, Futures Housing Group
Working on a major refinancing project like we have just done at Futures Housing Group represents the end of an era, the dawn of a new one and the hard work of an entire organisation pulling together towards a common goal.
With our recent announcement that we have secured £310m in funding, we move into the most ambitious period in Futures Housing Group’s 12-year history.
Despite working on refinancing deals before, this was at times a completely different animal and there are some important lessons that had to be learned.
Doing the hard yards
For anyone else about to go through something similar, its important to realise just how much work you will have to get through to reach the end.
The sheer volume of contracts and paperwork should not be underestimated compared to refinancing deals I’d worked on before. Couple that with getting familiar with the London Stock Exchange rules and certain aspects of US legislation, and you’ve got yourself a mountain to climb.
My advice is to clear your diary as far possible and expect to be working extensively on refinancing until the job is done.
That means there’s some pain to endure but take solace in the knowledge that what you are doing is vital to the success of your organisation. This kind of work demands your attention, so surround yourself with good people whom you trust in order to fully focus on securing the best deal for your organisation.
Stick to your guns
Taking the public bond route, we were able to generate competition between investors and attract the right companies to work with. This was perfect for institutions such as pension providers, as long-dated housing association debt fits their investment model.
That competition helped us secure the initial £150m of public bond funding, with the other £110m being secured from new bank facilities. The remaining £50m retained bond will be sold at a future date.
Working with financial consultants Savills and attaining Standard & Poor’s A+ credit rating with a negative outlook helped us prepare for the public bond market and make us an attractive investment opportunity.
We also listened to book-runners working in the financial sector, who really have their fingers on the pulse when it comes to what investors are looking for. This advice was gold, especially when deciding on how long we wanted to make the debt period, with investors much more interested in 25-year loans as opposed to 30 years.
However, from the outset and during any talks we had with advisers, we knew what we would and wouldn’t be happy with. We weren’t afraid to dig our heals in on certain issues. It’s important to set your stall out and know what you want to achieve at the end, otherwise you’ll never know what a good deal looks like.
Find strength in your organisation’s quality
Back in 2016, we completely overhauled our corporate plan, our visions and our objectives to help all of our team, our customers, our partners and our investors see exactly what we want to achieve as a progressive housing association.
Three years later and it’s paid off. Virtually everything we have done as a business has been rooted in the plan we set out to do. If it wasn’t in the plan, we didn’t do it.
And we’re well on our way to surpassing our targets. For example, we’re close to having created 1,000 homes by the year 2020, we’ve achieved Investors in People Gold and we boast one of the lowest rent arrears figures in the industry (1.19%).
The best evaluation of this work is evident by having over £900m of bids for the initial £150m issue.
Securing this new funding allows us to expand further on our fundamental business function of building and maintaining social and affordable housing for the people in our communities.
In this next period, we have already outlined plans to create a further 1,200 homes in the next five years utilising operating cash flows and the additional refinance monies.
That’s not to say that we’re completely reliant on funding to deliver our homes mission. In 2016 we launched our own private development company to generate new income streams and increase the tenure types we can offer to customers. Money from this venture is being reinvested into our core business, and that commitment has served us well in proving that we are a solid business partner.
A culture of innovation
Embracing Innovation is one of our core values, and one which I naturally gravitate towards such is my interest in emerging technologies and new thinking that can improve the way we work.
I was delighted to see our 300-strong workforce take to concepts such as agile working like ducks to water, enabling us to get out of the office and take our work closer to our customers – an example which impressed the would-be investors at various points of the refinancing process.
Grasping concepts like this has changed how we operate and allowed us to create a more mobile, flexible workforce which has everything it needs, wherever they are. We’ve been able to save more money this way through closing down offices that were, at best, half-filled in certain areas. Instead, we have opened up smaller working pods where our team can touch down, plug-in and get work done on the fly rather than nail them to the same desk for eight hours a day.
Futures is an organisation which refuses to stand still and I’m so proud of the work that has been done by everyone in our business to get us to this point. There’s a lot of hard work ahead as we push into a new era and deliver our most ambitious plans to date, the backing we’ve had from investors, stakeholders and staff gives me enormous confidence.