Trowers & Hamlins advised VIVID Housing Limited on a £110m funding package from Barclays Bank PLC, including what is believed to be a sector first £50m Green Term Loan and £60m sustainability-linked RCF.
Green Term Loan
The first of its kind in the sector, the 10-year £50m Green Term Loan will enable VIVID to specifically fund over 300 new energy efficient homes of EPC B+ or better across Hampshire and Surrey.
The Green Term Loan aligns to the Climate Bonds Initiative Criteria and the Loan Market Association Green Loan Requirements. They will have emissions intensity in line with the Low Carbon Buildings Criteria, which is aligned with the goals of the Paris Agreement.
Failing to meet EPC B+ or above is not an Event of Default under the Facility Agreement, but it results in VIVID losing the ability to publicise the loan as a "green loan" and, perhaps more significantly, a upward margin ratchet. Whilst the market has mainly only seen downwards margin ratchets in the past, this upwards margin ratchet is now being increasingly adopted in connection with ESG KPIs such as Barclays' EPC B+ threshold.
Sustainability-Linked RCF
VIVID must meet all the ESG metrics on the Sustainability-Linked RCF, as follows:
- E: using the facility to develop an agreed number of new units with EPC B+ or above per year
- S: helping its tenants obtain additional income through providing welfare or financial advice.
G: maintaining European sustainability reporting standards (ESRS) – G1 (Governance, risk management and internal control)
Depending on whether these KPIs are met or not in any year during the term of the facility, the margin ratchet on the Sustainability-Linked RCF can decrease and increase for the following 12 month period.
The margin adjustment clause in the Sustainability Linked RCF is to be kept under review by VIVID and Barclays to ensure it remains ambitious and relevant as regulation or market practice change.
Further to the sustainability-linked facilities, Trowers also advised VIVID on the refinance of its existing Term Loan facility with Barclays Bank UK PLC, to include unsecured lending and an unencumbered asset covenant test. Originally entered into in December 2017, the facility is split across four tranches with a total commitment in excess of £118m.
The Trowers team was led by Partner Helen Fysh with support on the banking side from Lilli Sutherland, Robyn Asbury and Rob Woolliams with Katie Dyer and Caroline Nugent also advising on the security work.
Helen commented:
"We are pleased to have supported VIVID in facilitating this innovative transaction, incorporating both LMA green loan principles and LMA sustainably linked loans principles. This progressive deal highlights VIVID's commitment to minimising its environmental impact while continuing to deliver new homes and support its residents through increased welfare payments."
Duncan Brown, Chief Finance Officer, VIVID said:
“We’re extremely proud of our sustainability work – focussing on making our homes more affordable for our customers to live in – and we’re excited about partnering with Barclays to build some of the most energy-efficient homes in the country”.
David Cassidy, Head of Social Housing at Barclays Corporate Banking, said:
“We are proud of our longstanding relationship with VIVID and are pleased to support them with this new package of financing. As well as reaffirming our long-term commitment to VIVID, this work signals our broader desire to fund the creation of new energy-efficient homes that provide a warm, safe, and affordable housing solution for our client’s tenants”.
Barclays worked with Lee Shankland-Gort and Iain Rodley at Addleshaw Goddard on developing the documentation for this new product, with Iain leading the AG team on this transaction. Iain noted:
"It was fantastic to work with Barclays over a period of months to develop this innovative product which provides more flexibility for borrowers than standard green loan facilities in the syndicated markets. We were delighted to work with the teams at VIVID, Barclays, and Trowers & Hamlins on the overall transaction and completing what is believed to be the first green loan facility for the social housing sector for our key client Barclays. We expect to see green loans become a big feature in this sector as Registered Providers seek specific use of proceeds funding as part of their net zero journey."
