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

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.”