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Timing was right for Torus and Liverpool Mutual Homes merger, says CFO

A more positive housing policy environment facilitated the speedy merger of Liverpool Mutual Homes (LMH) and Torus, according to its chief financial officer.

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Picture: Getty
Picture: Getty

News of the plans for the North West provider, which will keep the Torus name, broke in March 2018 before the deal completed in December, creating a group with 38,000 homes and around £180m of turnover per year.

The new provider aims to build 5,300 homes over the next five years “as a minimum”, and the majority of the development pipeline has secured funding. The new housing association has £300m of combined debt and facilities for £200m, which as yet have not been drawn down.

The merger was formed as an amalgamation of the separate providers. Torus was originally created through the merger of Helena Partnerships and Golden Gates Housing Trust in April 2015.

Peter Fieldsend, chief financial and commercial officer at Torus, told Social Housing that a previous plan by LMH to merge with Symphony came at the “wrong time”, with both associations needing to reorganise due in part to the four-year social and affordable housing rent cut imposed on housing associations across the country in 2015 by then chancellor George Osborne.


“The rent cuts were just coming along when we had the Symphony discussion and both organisations were debating how to deal with those rent cuts,” he said.


“Now both LMH and Torus have dealt with them.


“At that stage with Symphony we weren’t merger-ready, partly due to those cuts, and we had to deal with those issues individually as organisations before merging. The timing didn’t quite work.”

New structure


According to Mr Fieldsend, the new structure will see all four subsidiaries brought together under a new board, which has agreed a transformation plan that should complete by summer 2021.


“We brought together four RPs through amalgamation – technically the amalgamation has allowed things to happen from day one. We don’t have a group structure to collapse – the four RPs are to be brought under one RP.


“There are also trading subsidiaries which we’re in the process of amalgamating. We both have a commercial subsidiary – two development companies and one charity.”


According to Torus, the association’s commercial arm HMS generates profit through both intra-group and external contracting operations.


All profits made are gift-aided to the RP’s own charity, ComMutual. In 2017/18, HMS (which was at that time an LMH Group member) gift-aided £2m to ComMutual. As the organisation moves forward as new Torus, that figure is anticipated to rise to £5m per year.


Mr Fieldsend said that although the structure isn’t unique, the scale of it was larger than most other operations under the same system. The plan, according to Mr Fieldsend, was to scale up this system within the newly combined group.


Torus says that the new business plan is “fully supported by all funders”, and has sufficient headroom to deliver on the RP’s future ambitions. A new treasury secretary will be established once the group board has agreed a new corporate plan. This is anticipated to be formulated in the coming months.


“Scaling up will be a challenge and will be exciting,” Mr Fieldsend said.

He added that there is a two-and-a-half-year transformation programme, with target metrics on the Sector Scorecard such as cost per unit.

“We have been set tough targets by the new board, and have to deliver on efficiencies.”

According to Mr Fieldsend, the financial backers for the RPs gave the merger their support. The combined association has six lenders: RBS, Barclays, Santander, Nationwide, Warrington Council and The Housing Finance Corporation.


“Both organisations had recently refinanced so the funders were extremely positive. We gained consent from them well in time for the merger. They understood the business case.


“All [funders] charged a fee which was acceptable. One funder changed rates very slightly but the impact was the same as a fee – it was easier for their internal processes.


“We avoided any loss of value from the merger. It was about bringing your funders close to you and explaining what you are saying. It was about selling the board and selling the management team. The funders we have now all stayed with us.”


The deal also saw a new business plan drawn up with revised timetables for peak debt within the newly amalgamated group.

According to Torus’ accounts prior to the merger for 2016/17, Golden Gate Housing Trust’s business plan anticipated a peak debt of £62.8m in 2024/25, repaying in 2036/37 in line with funding requirements. Helena Partnerships’ business plan shows a peak debt of £138.5m in 2018/19, repaying in 2026/27.


Mr Fieldsend said that the merged association will take a fresh look at its finance in the coming years once the transformation process is complete.


“We will need to do something with our financial arrangements at some point. We will be looking for additional funding in two or three years’ time, possibly sooner. How that comes about will be ascertained in time. It could be more bank debt or the bond market or an aggregator – it depends on what funding we require and when.”


The merger is likely to accelerate any development plans that the new RP has, according to Mr Fieldsend, who said that the change in attitude from the government and financial institutions has been an obvious boon.


“I think the environment is still very positive for HAs. People have come around that associations can solve problems. It’s taken some time for that, but in the political environment HAs are seen now as organisations that can respond to problems.”

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