​Swan takeover by Sanctuary step closer after loan breaches waived

Swan’s bondholders have agreed to waive breaches of loan agreements in a move to enable the troubled housing association and modular developer to be taken over by 105,000-home provider Sanctuary.

Swan Housing Capital, the funding vehicle for the 11,500-home Essex-based landlord, announced bondholders had passed an “extraordinary resolution” to waive the breaches at a meeting on Tuesday. Sanctuary had asked for assurances that any breaches would be waived before its takeover – expected by the end of this month – 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.