Optivo agrees £73m borrowing deal with nine councils

Housing association Optivo has agreed a £73m revolving credit facility (RCF) with nine unnamed local authorities to support the provision of social housing.

Optivo, which has a funding portfolio of over £2bn, agreed to the three-year RCF to support its liquidity requirements and to show its capability for future funding commitments.

Tariq Kazi, director of corporate finance, told Room151: “We’ve already been a borrower of local authority funds in the past and this transaction arose through our ongoing discussions with advisors who support local authorities.

“There was a good match between our funding requirement and the local authorities’ treasury strategies.”

A mix of county and district councils, plus one unitary authority, are involved in the deal and are each contributing funds ranging from £5m to £10m. There is also one external private investor.

The RCFs have the same standardised borrowing rate and were arranged by debt and investment advisor Arlingclose.

This is a really big opportunity for councils to be doing something that is good financially but also good socially.

Financial and environmental advantages

Stephen Kitching, consultancy director at Arlingclose, said the borrowing has many advantages. Local authority lenders would benefit from excellent credit quality, while helping to provide social housing and thereby showing a focus on Environmental, Social and Governance investments.

“This is a really big opportunity for councils to be doing something that is good financially but also good socially,” he told Room151.

The RCFs allow councils to generate income even when the funds are undrawn, as Optivo will pay a fixed non-utilisation fee. Optivo said it anticipated using the money as a “standby” funding capacity that it did not expect to draw on.

Kazi added: “The new £73m contributes to our overall portfolio of undrawn facilities and liquidity headroom, which is over £600m in total.

“Together with other committed bank facilities, these new local authority facilities provide us with the certainty of being able to draw funding if we need it.”

The deal enabled Optivo to diversify its borrowing and achieve greater flexibility on loan terms, which is something it had been looking for since the pandemic.

Kitching told Room151: “The councils and housing associations were able to be much more flexible and provide the terms and conditions that a bank wouldn’t be able to, which was a big priority for Optivo.”

The deal allows Optivo the option to extend after the three-year term.

—————

FREE weekly newsletters
Subscribe to Room151 Newsletters

Room151 LinkedIn Community
Join here

Monthly Online Treasury Briefing
Sign up here with a .gov.uk email address

Room151 Webinars
Visit the Room151 channel