TIDM61HI
RNS Number : 2390C
Swan Housing Capital
07 October 2022
Delay to publication of audited accounts
Swan Housing Capital plc
7 October 2022
DISCLAIMER
Please note that the information contained in this notice may be
addressed to and/or targeted at persons who are residents of
particular countries (specified in the Prospectus dated 3 March
2015 relating to the issue by Swan Housing Capital plc of
GBP250,000,000 3.625 per cent. Secured Bonds due 2048 (the
Prospectus ) ) only and is not intended for use and should not be
relied upon by any person outside these countries and/or to whom
the offer contained in the Prospectus is not addressed. Prior to
relying on the information contained in this notice you must
ascertain from the Prospectus whether or not you are part of the
intended addressees of the information contained herein.
Your right to access this service is conditional upon complying
with the above requirement.
This information in this notice is not intended to be a complete
and up to date description of all of the activities and risks
within the Swan Group - not least because the current proposal is
that the merger with Sanctuary will result in the mitigation of
those risks; and that matters remain fluid.
Swan Housing Capital plc - GBP250,000,000 3.625 per cent.
Secured Bonds due 2048
On 5 March 2015, Swan Housing Capital plc (the Issuer) issued
GBP250,000,000 3.625 per cent. Secured Bonds due 2048 (the Bonds)
and on-lent the proceeds of the Bonds to Swan Housing Association
Limited (Swan HA) pursuant to a bond loan agreement dated 5 March
2015 (as amended or supplemented from time to time, the Bond Loan
Agreement).
Further to the Issuer's announcement on 27 September 2022 in
connection with the delay in publishing the group's consolidated
audited financial statements for the financial year ended 31 March
2022 (the 2022 Financial Statements) and providing them to certain
parties under the Bond Loan Agreement and under the Bonds, the
Issuer now announces that there continues to be a delay in
publishing the consolidated audited financial statements of Swan HA
and a delay to publishing the audited accounts of the Issuer.
The Issuer has provided details to M&G Trustee Company
Limited (the Bond Trustee) as to the delay and now sets out a
summary of those details here.
Background & context
-- Swan Housing Group comprises Swan Housing Association, a
Registered Provider and Community Benefit Society with charitable
status, and its subsidiaries.
-- Swan Housing Group has encountered significant challenges
during the year in its commercial operations, including cost
overruns and delays to works leading to slower sales. As a result,
the amount of debt in Swan HA has increased, as has the level of
on-lending by Swan HA to these subsidiaries.
-- It was announced on 10 December 2021 that Swan HA would
pursue a merger with Orbit Group, with Swan HA joining the Orbit
group as a subsidiary. In January 2022, Orbit advanced a secured
loan of GBP25m, which was subsequently increased to GBP40m in March
2022.
-- During this process, Grant Thornton LLP was commissioned to
carry out the year end audit of the Swan Group. On 23 September
2022, Grant Thornton highlighted it currently had insufficient
assurance on the level of impairment included in the 2021/22
accounts of GBP178.4 million in respect of certain development
schemes. In the absence of further evidence it would therefore
issue a disclaimer audit opinion but is prepared to conclude that
Swan HA remains a "going concern" on the basis of a merger. At this
point in time discussions with the auditors are ongoing regarding
the timing of the signing of the audited accounts and the wording
within the auditor's report.
-- Following lengthy discussions and a detailed due diligence
process, it was confirmed in late September 2022 that the merger
between Swan and Orbit would not proceed.
-- Swan HA and Sanctuary Housing Association have now entered
into detailed discussions regarding a potential transaction which,
if consummated, would involve Swan HA becoming a subsidiary of
Sanctuary HA.
-- Swan HA is also in discussions with Sanctuary to refinance
the Orbit loan with a loan from Sanctuary which, if agreed, would
replicate the Orbit facility and if required add to it.
-- Swan's management and board are engaging closely with the
Housing Regulator and its auditors to keep them appraised of the
status of the potential merger discussions with Sanctuary. Swan and
Sanctuary are engaging with Swan's auditors to ensure that the
accounts will be signed off if the Sanctuary merger goes ahead.
Liquidity & going-concern issues
-- Swan HA presently holds cash of GBP24.3m. On current
(unaudited) projections Swan HA's cashflow shows the GBP24.3m being
sufficient to fund the operation of subsidiaries until early
December, subject to agreement of on-lending thresholds with its
bank lenders.
-- In the circumstances, Swan group has appointed advisors to
provide the boards with weekly assurance about whether it is
appropriate to expend these sums.
Position with key funders
-- Swan HA is currently in dialogue with its key bank lenders
with a view to maintaining an effective "standstill" position in
relation to anticipated breaches of its loan covenants, including
the late filing of audited accounts.
-- Each of Swan HA and the Issuer is also keeping the Bond
Trustee appraised of the situation and will continue to keep it
appraised of any further developments. Other than as referred to in
the RNS announcement dated 27 September 2022, the Bond Trustee has
not been required and has not granted, at this stage, any waiver or
consent to any potential defaults or defaults. The Bond Trustee
expresses no opinion as to the contents of this notice or its
impact on the Bonds and/or the Bondholders, other than to note that
they should seek their own financial and legal advice.
-- The Swan Group will now require sufficient time for Sanctuary
to complete its due diligence process, and, if satisfactory
agreement is reached, to complete a transaction.
Sanctuary: rationale and timeline
-- Sanctuary provides housing and care in England and Scotland
to more than 250,000 people, owning and managing more than 105,000
homes. It has ratings of A (stable) with Standard & Poor's and
A2 (stable) with Moody's. Sanctuary has a successful history of
distressed acquisitions.
-- The proposed transaction under discussion would involve Swan
HA becoming a subsidiary of Sanctuary Housing Association and would
seek to achieve the following objectives:
o To safeguard services to tenants and communities.
o To ensure the financial solvency of Swan.
o To establish lender confidence in the new enlarged Group.
o To satisfy the Housing Regulator that the new enlarged Group
is rated at least G1 and V2.
-- Subject to the satisfactory completion of Sanctuary's due
diligence, and the agreement of transaction terms, both parties
would seek to complete the acquisition by 30 November 2022.
For further information or to arrange a meeting with Swan's
management, please contact:
Phil Jenkins
Centrus Advisors
phil.jenkins@centrusadvisors.com
07788209354
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