Help & Assistance

The challenge

• Hedge long-term debt, while managing payments on variable debt in the short term.
• Restructure Bromford’s financial relationships, setting up credit lines with four banks.

Wolverhampton-based Bromford Housing Association currently operates some 18,000 homes across central England, and adds 800 new properties a year to its stock.

With loans of £300million, managing interest rate risk – like many other housing associations – is at the heart of its financial strategy. Andrew Battrum, Bromford’s financial director, traditionally arranged fixes to save money and allow for more accurate calculation of debt repayments. Usually only allowed to set up these sorts of arrangements with the bank that originally provided the loan, Bromford got the Housing Corporation’s approval to use stand-alone derivatives offered by other institutions.

“We weren’t just trying to hedge our long-term debt, but also to manage the interest rate payments on our variable debt,” says Battrum. “We wanted to be able to pick our loans up and move them around without incurring breakage costs, so we asked the banks what arrangements they could offer to help us manage our interest rate risk.”

The solution

We opened up credit lines with several banks (other than the bank that originally provided the loan) and arranged £10 million of debt funding at one per cent below base rate, generating savings of £100,000 in the first year. “Normally when you take out a credit line with a bank you have to use cash to cover the risk, but we were able to use our properties, which was of significant benefit,” says Battrum.

Why Lloyds TSB Corporate Markets?

• Two-week turnaround on paperwork.
• Flexible arrangement over 25 years.
• Significant savings in first year of arrangement.