Swan rescue talks ongoing as expected merger date passes

Sanctuary has yet to complete its rescue of troubled housing association Swan as this week’s expected takeover date passed with no announcement.

Swan had previously said the rescue deal with 105,000-home Sanctuary is “expected to take place on or prior to 31 January 2023”, however this week it said discussions with third parties around consents are ongoing.

A spokesperson for Swan said: “Swan’s proposed business combination with Sanctuary is subject to obtaining appropriate consents and satisfactorily concluding commercial discussions with third parties and we can confirm that this work is continuing to progress.”

Swan Housing Capital, the funding vehicle for the 11,500-home Essex-based landlord, last month announced bondholders had passed an “extraordinary resolution” to effectively rule out any future action over the breaches. Sanctuary had asked for assurances that any breaches would be waived before its takeover could go ahead.

Swan, which ran into financial problems in 2021, had breached lending agreements relating to a £250m bond, the proceeds of which were on-lent to Swan Housing Association.

It failed to deliver security trustee M&G Trustee Company its consolidated financial statements as agreed, along with Swan Housing Capital’s balance sheet and profit and loss account. The accounts were not delivered due to talks about a potential takeover by housing association Orbit coming to an end in September, it said.

The merger between 105,000-home landlord Sanctuary and 11,600-home Essex-based Swan had been due to complete on 30 November but was delayed due to the need to secure lender consents.

The saga surrounding Swan began in 2021 when the Regulator of Social Housing found the 11,600-home association to be non-compliant with its governance and financial viability standard after losing control of its development programme costs.

It revealed its draft accounts include an impairment charge of £138.6m in 2021/22 and a further £55.3m charge recognised as an adjustment in 2020/21, both relating to development schemes.

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Swan, which had invested significantly in modern methods of construction, initially went into discussions with Orbit regarding a merger before talks broke down following due diligence.

In October, as the loan covenant breaches emerged, it also came to light that Swan only held enough cash to last until early December, although it has since negotiated a £50m loan with Sanctuary.