Housing associations’ interest rate swap saves £500,000
Published by Max Salsbury for 24dash.com in Housing and also in Finance
Notting Hill Housing Trust and Octavia Housing’s interest rate swap with each other will save the social landlords almost £500,000.
The 24-year, £12 million transaction follows two similar deals made by 27,000-home provider Notting Hill in January with Aster Communities, when the housing associations agreed to a £22m, 24.5-year contract and a £8m, 25-year one.
Paul Phillips, group finance director at Notting Hill, said: “We continue to manage interest rate exposure following our bond issue earlier in the year in the most risk adverse and cost-effective way. This swap with Octavia provided the best way to do it and has generated significant risk and cost savings for both organisations.”
Mark Gayfer, finance director at 4,000-home provider Octavia, said: “We are delighted to have been able to undertake this interest rate swap transaction with Notting Hill, which has a good credit rating and with which we enjoy an excellent relationship.
“The terms of the swap have allowed us to reduce our floating rate position which had increased in recent months as we drew down funds for our development programme, and the rate we have achieved shows significant savings when compared with those available from financial counterparties.”
The deal was managed through TradeRisks’ OTC Exchange platform. Managing director Antoine Pesenti, said: “Beyond the obvious monetary savings, Notting Hill and Octavia have taken advantage of their superior credit quality and have entered into a two-way property collateralisation agreement on the swap which is of significant additional benefit to both parties. The sector is ideally placed to find internal efficiencies and we only see the appetite of associations growing."