Acton speeds loans and eases refinancing with trust fund

Acton Housing Association has set up a trust fund to handle security on its loans in order to speed up loan negotiations.

Under the scheme, security – generally housing units – is pledged to the free-standing security trust, held on Acton's behalf by Prudential.

With Acton's permission, Prudential allocates security to pre-agreed lenders Bradford & Bingley and Bank of Scotland and to a £40m interest rate derivative held by Dexia. Acton negotiated a new £25m facility with Bank of Scotland and a £40m loan from Bradford & Bingley before setting up the trust, but it already had the Dexia derivative.

The trust makes refinancing deals easier as the derivative means Acton no longer has to fix interest rates within loan agreements, and security does not have to be released by the first lender and recharged to another.

However, Acton finance director Dean Tufts said the association "had no particular desire to refinance its borrowings with its existing lenders".

It will allow Acton to set up loans with the agreed lenders more quickly, because the security will already be available from the trust. "I can put security into the security trust deed before I have negotiated a loan to take it," said Tufts. "This was the main reason we did it, so that when we negotiated a loan security was already there so we could draw down funds from the loan straight away. It saves a lot of time. A side product is you can move security around in it relatively easily."

Acton is only the second housing association to have a freestanding security trust. Sunderland council's stock transfer was the first registered social landlord deal to include such a facility, in March 2002.

In a separate development, Acton has also signed a £10m loan extension with Newcastle Building Society.