An Interview with Fenella Edge

Fenella Edge has left her role as group treasurer at THFC after 20 years leading on funding deals for the £8bn bond aggregator.

Luke Cross, from Social, spoke to Fenella about guiding THFC into a new era, how the sector has changed and the professionalisation of the treasury specialism in social housing.

So, after two decades – how does it feel to be leaving THFC?

Twenty-one years is a long time to be in the same job. But it hasn’t been the same job for 21 years, and when I think back to when I first joined THFC, there were eight of us and I’ve had to do a bit of everything really….from putting systems in place to managing the business and the loan book. The sector’s evolved in such a way that we’ve had quiet times and then we’ve had mad busy times.

I think it got to the stage where once we recruited Arun, in 2021, I could see a time when I could step back and not be as absolutely engrossed in it as I had been. It’s hard, though. I had a child about the same time as I joined THFC; Harry was one when I joined, and THFC has grown up at the same time as Harry’s grown up. So it is really hard to imagine not being here!

Looking back to 2002 – did you already have a social housing sector background, and was THFC a natural move?

Piers and I are similar in some ways in that we both came from a bank treasury background. I worked for Abbey National Treasury services for 11 years, but again, doing different roles. I really wanted to go back into banking treasury because that had always been my thing, really. They knew that I was a sensible kind of risk person, not just a sales person. And I would stand my ground. And hopefully they saw some integrity there. I did have some social housing background because I was on credit committee at Abbey National and obviously they were a big lender, as Santander still is a big lender to the sector, so I did know of THFC.

I think one of the things Piers wanted me for was my emotional intelligence as much as my experience and skills in the business. So I think he really wanted me to try and help him gel the team and in fact Piers Colin and I ended up then being a really good threesome in taking that vision forward.
I’m really, really proud of the team that we have built now.

Was there work to do at THFC in 2002?

Our core product had kind of fallen out of favour. We did a little bit of bank lending in those years. I think Piers’s vision was absolutely right. We had to get a rating and we had to move to issuing more modern bonds. And that’s really what we focused on for those first couple of years – getting the story right to get the rating and then finding a bond structure that worked for us and our customers.

I joined in 2002 and we got our rating in 2004, so there were are a couple of years there where it was all about building, putting foundations in place to take it to the next level – and then from 2004 onwards, that was it. It was go, go, go. Piers was the visionary. And you know, it turned out to be a good vision.

What did you make of the sector in 2002?

I was surprised, actually. I remember the first finance conference I went to, probably March 2003. I didn’t know anyone…I went to every session because at least I could sit in a room and listen and I didn’t have to find someone to talk to. I was pleasantly surprised that it wasn’t all sandals and hair shirts, but I do think that in treasury in particular there was only a nascent kind of professionalism from a specifically treasury perspective.

And because our chairman at the time David Creed had worked for the ACT, he was very keen – as was Piers – that we worked with the ACT to persuade the sector that having a professional treasurer, especially for the large organisations, was definitely the way forward. And if you think now how many housing associations have professional treasurers, ACT qualified, compared to when I joined 20 years ago – it’s quite a lot, and I think the ACT have done a great job in encouraging the sector and persuading the sector that their qualification is relevant for the social housing sector and I think that’s been a big shift in pure treasury terms. It is a different way of managing your debt portfolio than perhaps when you just had a cosy relationship with your banks.

And it was more a sector of finance director rather than treasury professionals at that point, right?

Yeah, exactly. But if you look at people like Martin Watts, Tom Paul, and Gareth Francis – I think people like that are how this sector has changed over the last 20 years. So in that respect, it’s been really good and encouraging for me to watch, slightly from the outside, but sort of from the inside too.

And I suppose that reflected where the sector was in terms of its finance, right, because it was all bank finance with the occasional own name deals?

Yes – it was really towards the end of that period when more of the larger associations started doing their own name deals and then the private placement market really opened up.

Then medium sized associations could have a capital markets presence because you didn’t need to go in and do a £250 million (index-sized) deal.
It really has changed a lot.

What were the high points over the years?

I think the other thing that Piers and I did early doors –  and this is one of the things I’m absolutely most proud of –  was really getting that European Investment Bank (EIB) relationship going again. Since I’ve been here, I think we’ve done £2.5bn of EIB borrowing – little old THFC, as we were in those days.

It gave us the ability to compete with bank debt, because we could offer floating rate, we could offer different maturities – and at margins tighter than banks. So I think that really helped us to become a relevant offering in the market alongside our bond offering. And then, of course, that EIB relationship helped us deliver the Affordable Homes Guarantee Scheme 2013. It is down to relationships I think and the fact that we fostered that relationship really quite carefully.

The financial crash (2008/9) was a big turning point for sector financing – long-term bank debt sort of just disappeared – what did that mean for THFC?

This is where your legwork really pays off. So all the legwork we did in the early days in terms of fostering relationships with institutional investors meant that we could issue bonds all through the financial crisis. We were busy. We were issuing bonds, but that means that someone has to buy them and I do think institutional investors showed their support for the sector generally. We were able to grow the balance sheet quite a lot in that in that period.

We also had some EIB deals on the go at that time, so again, it was the importance of the relationships that you foster in the good times to really help you through the more difficult times.

That was also a huge credit to the sector, that it was viewed as an investible sector even throughout the worst financial crisis in a generation.
And that’s always been part of our job, to promote the sector to institutional investors and others. That doesn’t happen by itself. We understand the sector, we understand the risks.

Do you think institutional investors saw less risk in the sector at that time, given grant rates and government support?

I think a lot of the headwinds that we face today had either not materialized or hadn’t come to the fore. For example, the high-rise fire safety problem. Clearly it was there as an issue, but had not been brought to the fore. I am still astonished by some of the problems on high rise blocks that have been built fairly recently. So from an institutional investment point of view, yes, it was a fairly benign sector and well regulated. We always talked about the four legs of the stool: strong regulator, strong cash flow from housing benefit, grant support and all secured.

For investors, as social housing has become a bigger part of their portfolio, they have had to invest themselves in the skills, the credit skills to understand the sector more deeply. And I think that’s where we are now. THFC’s role back then was almost that investor relations piece for the sector
We’ve come a long way from the idea that ‘THFC is doing all the credit due diligence, it’s fine’.

The amount of questioning we get and the amount of understanding you can tell they have of the risks in the sector is really quite different. People like Fiona [Dickinson] at abrdn understand the sector in depth. But then there are other investors who Piers calls the ‘Johnny come latelys’, so there are definitely different levels of understanding of risk and our job is to make sure they’re all on the same page really.

In a way, THFC has provided a mini regulator view of life. We’ve got great credit team and I’m very confident that we will be able to keep that role of knowledgeable friend to institutional investors.

We’re now in a challenging interest rate environment – but there have been plenty of ups and downs over the last 20 years too right?

One problem is a lot of people in our sector who are younger than me have only ever known rates either come down or below where we are now! When I first joined THFC the first bond we did had a coupon between 5% and 6%, but in that time and after that, rates just kept coming down. Even best in the sector are seeing challenge after challenge at the moment and it’s very difficult to assess your priorities and manage the business accordingly. But I think the guiding light for our sector throughout all this is just don’t lose sight of the customer. That’s a really good discipline – we’ve got to put customer at the heart of what we’re doing.

And there’ll be some tough decisions. And there is the question too: who are your customers? Is it today’s customers or is it tomorrow’s customers? Do you want to be building new homes for tomorrow’s customers? You can’t do everything. I think there are difficult decisions being made day in, day out in housing associations at the minute. And I think high interest rates have caused a bit of a bit of a pause for thought in many organisations, but we are seeing the nascent signs of people thinking that they could dip their toe in the water again and have a look at capital markets borrowing. And this is the point of stress testing, right? Everyone should have stress-tested their business plan with higher interest rates for their debt portfolio. Here we are in in what some business plans would have said is the perfect storm.

But again, this is where I think the sector has improved massively since I joined 20 years ago – in the level and sophistication now of business plan modelling and stress testing.

So what have been the highs and lows?

I like doing deals! So really the guarantee scheme and the whole EIB period, I think those are the two highs for sure. The fact that we’ve been such a regular and frequent issuer in the capital markets has been great. There is no one in the sector who has got more experience of doing bond issues than me and it’s been really good fun for most of it. I think there’s been some difficult times when the market’s been not very conducive to us doing deals.

And there’s no way I could have stayed here for this long and worked with Piers if that had not been a good relationship. I mean, he is one of the most infuriating people to work with, but also, the best boss I’ve ever had! He’s intelligent and he will always think things through and he will admit when he agrees with you and he was wrong. So yeah, I think it’s been a relationship that has worked well for each of us personally, but also for the business.

What are the things you’ll miss on day to day?

What I think I’ll mostly miss in going from an executive role to a non-exec role is the social aspect of being in the office and interacting with people, chatting about what’s going on in the in the market, in the sector. I’m a social person, so I will miss interacting with people and it’s the silly things, isn’t it?

Like who am I going to talk to about Bake Off? And Strictly? Clearly not my husband…