Our financial future

Stonewater is making progress towards finalising a £100 million loan from the European Investment Bank. In our view, the proposed deal offers significant benefits to our business and our tenants. There are risks, but we are clear on what these are and how they will be managed.

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Although uncertainties arising from Brexit mean it has taken several years to get to this point, I believe the deal we are finalising is a good one as it allows us to maximise our efforts to build more affordable homes to help tackle the housing crisis. We are aiming to deliver 4,850 high-quality, affordable homes over the next four years – a substantial increase on previous years.The EIB loan will form a valuable part of the funding required to deliver the programme.

We can also use the £100m loan for our continued investment in improving the thermal efficiency of our existing properties, saving tenants money in the process.

The cost of the EIB loan is significantly less than that of alternative funding. At present a bond will cost a housing association around 150 basis points (1.5%) more than government borrowing (the overall rate on EIB loans is often 25-35% less than the cost of bonds).

But what about the risks? First, it is important to say that the loan will run for the long term, well beyond the departure of the UK from the European Union. This isn’t necessarily a problem, but there is a possibility that future changes to the UK relationship with the EU may trigger the early repayment of the loan. We are planning for this scenario.

This planning forms part of our wider preparation for Brexit, where we have ensured Stonewater has sufficient funds in place to deliver our house building and existing stock investment plans, and that we carry enough liquidity – cash and immediately-available bank facilities – to be able to respond to sudden changes in our operating environment caused by either political or economic factors.

As part of this approach, in 2018 we sold £50 million of the £250 million in retained bond funding from November 2017 issue and plan further fundraising to support the delivery of our strategic aims.

We and our partners at the EIB are keen to finalise the £100m loan as soon as possible, so Stonewater can put the money to work continuing to support our communities across the country.

John Bruton is Executive Director of Finance, Stonewater

**published in 24housing's print edition for March 2019***