Choice Housing is one of the largest¹ independent housing associations in Northern Ireland. It is part of the Choice Group which employs over 400 people and maintains over 13,000 high quality homes to meet the diverse needs of approximately 30,000 tenants and residents. They provide general-needs housing for families and single people; sheltered housing for older people; purpose-built homes for families with complex needs; housing for vulnerable groups with support from like-minded partners; as well as support services for tenants and the wider community.

Choice’s ambition is to “to make a positive and sustainable difference by increasing the supply of decent and affordable homes, by ensuring access to excellent support services, by promoting inclusive and thriving communities, and by making best use of our resources”. Over the next three years, it is planning to develop a further 1,500 homes.

Choice, through its advisor Savills Financial Consultants, approached Ulster Bank to raise funding for its investment pipeline and provide a hedging solution to reduce the associated interest rate risks.

Based on the landlord’s development plans and resulting financial requirements, the teams from Ulster Bank and NatWest (both part of NatWest Group) agreed a 15-year £70 million loan with Choice. They also structured a tailored loan-linked ISDA hedging arrangement to provide Choice with the flexibility to manage its interest rate risk, and minimise its cost of carry.  

Loan-linked ISDA agreements are a relatively new approach to interest rate hedging for the housing sector. In such cases, the hedge has a specific contractual link to the underlying loan and therefore to the security underpinning that loan. As a result, housing providers are usually not required to supply additional security for the purpose of covering any risk related to the hedge. What’s more, loan-linked ISDA hedging solutions offer more flexibility: for instance, the interest rate swap can be structured to hedge just a proportion of the loan amount or loan term.  

Michael McDonnell, Chief Executive of Choice Group, said: “We are pleased to announce this new loan facility from Ulster Bank. As a result of this arrangement, we are now able to access funds more quickly and effectively, and it has helped us fix our cost of long-term finance. The cost-of-living crisis, high inflation and geo-politics have impacted every sector across society, and social housing is no exception. Whilst our performance in terms of meeting our social homes targets has been good, this facility will support us greatly as we take forward our development plan for affordable homes in Northern Ireland.”

Richard Lusty, Relationship Director at Ulster Bank, said: “Ulster Bank is proud to be the preferred banking partner to support this transaction. Working in partnership with our NatWest colleagues, we were able to offer Choice a tailored solution that helps to achieve their goals and ambitions, alongside managing interest rate risk in more challenging economic times. Supporting the social housing sector in Northern Ireland is aligned with our purpose of helping people, families and businesses to thrive.”

Dominic Brindley, Head of Public Sector, Corporate Financing and Risk Solutions, NatWest, commented: “We are delighted to have been able to support Choice with a hedging solution that provides the desired level of flexibility and interest rate protection. We are seeing an increasing number of customers in the sector look at loan-linked ISDA hedging solutions given the increased flexibility that this offers.”

1: Source: bitcni.org.uk