Swan to close its offsite factories

Troubled Swan has told staff it is closing its two offsite factories as efforts to complete its delayed rescue merger with Sanctuary continue.

The stricken 11,000-home housing association has decided to close the loss-making facilities after last year breaching a regulatory standard when it lost control of development costs.

The housing association has now told staff in a letter that it would not be ‘financial sustainable’ to keep the factories open even after its expected deal with 105,000-home association Sanctuary.

The Essex-based organisation opened a cross laminated timber factory in 2017 in Basildon and last year fitted out a second factory to build steel-framed modular homes directly opposite it, which it said would allow Swan to build 1,000 homes a year. The landlord had been planning to build 10,000 homes in total by 2027.

An email to staff said: “It has not been a decision that we have made easily or lightly.

“However, it is simply not financially sustainable for Swan to continue to construct homes in this modular way, with Swan’s factory having been running at a loss.

“We must take steps to minimise our risk to ensure we can continue to deliver services to our customers and communities.”

Meanwhile Swan funder M&G Trustee Company has issued a statement saying it will not issue a default notice to Swan despite it failing to complete its rescue deal with Sanctuary by the expected 30 November date due to lender consents not being in place.

In October it emerged Swan had breached loan covenants, by not delivering its audited accounts to M&G on time.

But funder M&G said at the time it would not take any action in response on the basis the merger was completed by 30 November.

In a fresh update on Friday, M&G said that although it didn’t complete on 30 November, the merger discussions were ongoing and the deal has been approved by the boards, while Swan is talking to auditors to finalise the accounts.

The M&G statement said: “M&G is not aware of any adverse developments that would cause it to reassess its position…namely that it is currently minded not to serve the notices referred to in Clause 14.3 of the Loan Agreement and Condition 12.1 to enable sufficient time for the merger to take effect and the breaches to be cured.”

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

>>See also: Can housing associations keep development going as the rest of the market slows?

>>See also: Growing pains or cause for concern? What recent financial failures mean for the modular market

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.