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UK WINNER - SEAN ESCOTT
DEAL: B3Living completes GBP68m listed secured bond issue NAME: Sean Escott COMPANY: Savills Financial Consultants POSITION: Director TEL: 01527 893534 EMAIL: sescott@savills.com
BIO
Sean Escott is a founding director of Savills Financial Consultants which began in 2011 within the Housing Investment Consultancy division of Savills UK. The team which operates across the UK, provides a range of advice from business planning, project appraisal, debt and cash management as well as arranging new debt funding from traditional banking lines, private placements, public bond issues as well some more bespoke funding solutions.
Sean joined Savills in January 2011 from Sector Weedon Grant where he was a director of the Housing and Specialist Finance team. Prior to that, he was a founding director of Weedon Grant’s business plan and funding team before it was acquired by Sector in 2008.
Sean has worked in the housing association field since the early 90s having previously trained as a Chartered Accountant before joining Union Bank of Switzerland as part of their public sector corporate finance team.
He is a graduate of St Andrews University.
DEAL OVERVIEW Q
Please summarise the transaction
In January 2013, B3 Living Limited (“B3”) concluded a major refinancing inreasing their total debt to £110m. This exercise raised nearly £40m of new money, allowing it to develop 400 new affordable housing units in Hertfordshire. It reduced its banking debt down from £72m to £42m and accessed the capital markets to raise £68m of long dated funding (25 years final maturity, 4.823% coupon).
The deal allowed B3 to repay a portion of its bank debt, and in the process renegotiate its onerous financial and operating covenants to bring them in-line with traditional housing association bank covenants.
It
also lay the foundations for other smaller large scale voluntary transfer (“LSVT”) associations to access Sterling bond markets.
Q What was your role within the transaction
SFC is the retained financial advisor to B3 and has been since the organisation was formed in 2006.
B3 had and continues to have a strong business model. It was a question of taking the time to explain why the age/size were not an issue and indeed how B3 was in
many respects a stronger credit than some the markets had seen.
Q
What other types of clients or transactions have you been involved with
SFC act for a number of housing associations across the UK building on the comprehensive service offering of Savills UK. In the last 12 months, we have fulfilled similar roles for Longhurst Housing (raising £250m) and WM Housing Group (raising £200m) who have both accessed the capital markets. We are currently working on further refinancing/bond issues to come to market later in 2013 as well as a number of private placements for early 2014.
Q
Our role was to project manage and provide financial advise throughout the process. This involved taking them through the credit rating process, achieving an A1 rating from Moody’s and negotiating with their existing funders to achieve an agreed position on pricing, covenants and security.
Q
What were the challenges or difficulties presented
This was the youngest LSVT to come to the bond markets and to go through the rating process. B3 was not the typical deal – being so young it did not have the track record that some more established borrowers had and also being less than 5,000 units meant that it was much smaller than the market generally expected.
Q
How were the challenges or difficulties overcome
What are your thoughts and predictions for 2014 and beyond
The market for housing associations is complex. Historically a public sector based area of operation, which has changed significantly since the advent of private finance in the early 90’s. It is now a much more commercial operation with a charitable focus. Associations are under pressure from government to makefull use of their balance sheets to continue to develop properties to meet the ever growing housing need. On the other side their regulator is keen to ensure they do not go too far. They will continue to expand their operations into all tenure types and will continue play a significant role in the government’s plan to increase housing supply.
This will mean that they will continue to look at innovative ways to borrow money and make best use of their asset base. There is likely to continue to be a consolidation into ever bigger associations (some now approaching 100,000 properties) and smaller associations that cannot or choose not to develop will be absorbed.
The broad mix of property skills within Savills and the treasury expertise within SFC put us in a prime place to continue to assist over the coming years to meet the challenge.
Deal Maker of the Year Awards 2013