Introduction

THFC has worked with the European Investment Bank (EIB) in funding UK Housing Regeneration since 1998 – in excess of 10 years.  Whilst EIB operates in its own right in relation to very large regeneration schemes and also provides funding through third party banks THFC is the acknowledged expert in introducing EIB funding for investment in “smaller” housing regeneration schemes with a total cost of less than €50m.

EIB is the EU's long-term lending bank, owned by the member nations of the EC (the UK Government is one of the four equal largest shareholders with a 14% holding) that can provide investment funds at AAA rates for the purposes of investing in UK Housing Regeneration. For more information on EIB – the Bank promoting European objectives - see www.eib.org.

As a not-for-profit organisation THFC uniquely passes on the EIB money at cost and does not charge a margin, which is a substantial advantage to housing associations.   However, unlike major UK bank lending, EIB money is not available constantly but is instead brought forward in specific tranches of funds, made available through THFC for housing.  The money must be for urban regeneration and although this may seem to rule out many associations and developments, in practice, the definition of “urban regeneration” has proved to be quite wide so all but the most rural associations should have developments that qualify. 

Frequently Asked Questions

1 . What Is EIB Criteria / Eligibility?

A. The THFC team will be able to walk you through this in detail but in essence:-

• The European Investment Bank sets aside funds to support urban regeneration schemes. What really ticks the box is where a scheme is part of a published regeneration plan for an area.
• EIB only funds 50% of the cost of a scheme and does not fund any elements of land or “for sale” (although they can be carved out to leave the rented element).
• If the grant element of a scheme is more than 50% of cost then EIB will fund the balance of the cost less grant.

2. Who is the lender – THFC or EIB? 

A. THFC is the lender and will apply their own credit/security criteria which includes:-

• Security criteria of 150% Market Value subject to Tenancies (MVT) asset cover and 100% net annual income cover (whereby the income arising from the charged properties must cover the interest on the loan). It is not a requirement that the schemes being submitted be the properties charged, in fact it is far better for all to use other properties to hand which can be quickly charged, post signing of the loan agreement.

3. What documentation does THFC require?

A. In due course THFC will need to see a scheme submission form (follow link for proforma and an example).
Following approval of the schemes by EIB, THFC will then negotiate a loan agreement with the borrower incorporating THFC’s standard lending criteria.

4. Typically what margins would apply to the EIB money?

A. Unlike other loan agreements, EIB does not charge a commercial margin. As a AAA-rated supra-national bank, EIB’s funding cost in terms of spread over Libor is lower than any commercial bank can achieve. THFC will pass through the rates at which it borrows from EIB directly to the borrowing Associations without adding any further credit margin.
THFC covers its initial and on-going costs by charging a front-end fee and an annual agency fee.

5. Is Refinancing possible through the EIB route?

A. No. The essence of the initiative is around funding new urban regeneration initiatives and regrettably refinancing falls outside of this ambit. 

6. Is it not just the larger Associations which will be eligible for EIB money?

A. No – this does not necessarily follow, although inevitably the size of scheme/attendant paperwork dictates that there needs to be a reasonable size requirement.  As a rough rule of thumb a minimum loan size should be circa £2m for it to be viable.  That implies a total cash spend on a development of circa £4m.  It is not so much the size of the association as the suitability of the scheme that will dictate eligibility in practice.

7. Can I borrow at fixed or variable rates?

A. The borrower may borrow on one of the following bases:

• Fixed Rate – either to maturity or for shorter periods
• Floating Rate – with the spread relative to Libor fixed for a period to maturity or for shorter periods

8. What are repayment terms?

A. Term and Availability

• Term - Up to a maximum of 30 years from drawdown.
• Availability Period - Generally 18 months
• Repayment - Either bullet maturity (maximum 20 years) or amortising after year 10

9. What are the ongoing monitoring requirements?

A. In terms of ongoing monitoring, we require a revaluation of security every 5 years and an annual certificate from an Authorised Officer certifying compliance with the asset specific income cover test. In addition, we require standard financial information and copies of regulatory returns.

There are no corporate level financial covenants associated with this facility.

We will require an officer’s certificate on the completion of the scheme stating that the scheme has been completed in accordance with the agreed timescale and in line with the loan proposal and that either;

• no material difference has occurred from the information supplied at beginning; or
• if any major variances have occurred, a brief explanation of them.

THFC Contacts