Inside Housing – Home – Swan breaches loan agreement with lender due to late filing of accounts
The Swan Housing Association has defaulted on an obligation under its £250million bond loan agreement funded by a global investment firm after filing its annual accounts late.
Struggling landlord Swan Housing Association has breached a loan deal on a £250million bond funded by a global investment firm after filing its overdue annual accounts #UKhousing
In a statement to the stock exchange, M&G said a breach occurred in the terms of the loan agreement because the owner failed to provide its audited financial statements, including its balance sheet and profit statement. and losses.
M&G said the breach “will constitute a default by the borrower under the loan agreement if it continues for the 30-day period.”
The stock market update explained that the investment company is not required to take enforcement action unless it has been directed to do so by an extraordinary resolution, or the holders of at least a quarter of the principal amount of the bonds have requested it. in writing.
M&G acknowledged that auditors were unable to complete their audit of Swan’s accounts for the financial year through March 2022 due to the breakdown of its year-long merger talks with Orbit.
The financial audit is expected to be completed in the event of a merger with Sanctuary, with a completion date of November 30, 2022, subject to satisfactory due diligence.
As a result, M&G said it was “currently inclined not to serve notices of ‘breaches under the Swan Agreement’ in order to allow sufficient time for the merger to take effect and the breaches to be remedied at unless directed and indemnified, secured and/or pre-funded to its satisfaction”.
“M&G and its advisers will continue to monitor the progress of the breaches and the merger with Sanctuary and will reassess this position in light of any adverse developments,” the update adds.
Inside the housing revealed yesterday that Orbit had advanced the association a secured loan of £25m, which was later increased to £40m in March 2022, following the announcement of merger talks in December from the last year.
During the merger process, an audit of Swan’s 2021/22 accounts by Grant Thornton revealed a potential annual write-down of £178.4m against its development plans.
The auditor said he had “insufficient assurance” on the level of impairment and that the owner remains a “going concern” on a merger basis.
Last week, Swan was named as one of three landlords who announced they would submit their overdue financial accounts to the social housing regulator (RSH) this year.
The business update revealed that discussions with the auditors on the timing of the signing of audited accounts and the wording of the auditor’s report are continuing.
On the same day news of talks between Orbit and Swan emerged last year, the RHS rated Swan non-compliant on governance and financial viability.
The regulatory judgment said the downgrade was partly caused by a “material deterioration” in Swan’s financial condition.
When the landlord’s merger talks with Orbit broke down late last month, Sanctuary announced the same day that it had “entered into discussions with Swan Housing Association to form a business combination”.
If the talks are successful, Swan will become a subsidiary of Sanctuary.
The stock market update also revealed that Swan is in discussions with Sanctuary to refinance the Orbit loan and replace it with a loan of its own.
Swan isn’t the only organization to have sought to refinance a loan agreement or nearly breached a covenant in recent months.
Shepherds Bush Housing Group (SBHG) was found non-compliant in June on governance issues after the RSH identified issues that allowed the association to come “within weeks of a possible breach of loan covenant “.