North Hertfordshire Homes takes out loan with bond option

The loan, to fund the transfer of 8200 homes from North Hertfordshire council, allows the association to refinance part of the drawn bank debt through the bond market in the future.

Brian Milward, finance director of the post-transfer landlord, said the option to refinance through bonds and the competitive margins had attracted the association to the RBC package.

But he added that it might choose not to use the bonds option.

The deal also allows the association to have a higher than normal debt per unit of stock, meaning that it can retain some units to use as security on future deals. The cashflow covenant used means the lender no longer needs to approve small deviations from the association's business plan.

Phil Jenkins, vice-president of RBC, said: "All stock transfer lending has traditionally required business plan approval, which requires the association to be performing at or near the agreed business plan.

"The lender would have to approve every new business plan that came out, for example if work speeded up or slowed down.

"RBC's cash flow covenants – similar to bond covenants – give borrowers more room to operate."

The 8200 homes transferred to the association on 31 March. North Hertfordshire Homes' chief executive Kevin Thompson thanked the bank for putting the deal together in the "record time" of three weeks.

The loan covers the stock purchase price of £64m plus the anticipated cost of the association's repairs and improvements programme, which includes kitchen and bathroom upgrades and a £35m improvement programme for pre-reinforced concrete homes.