Swan only has cash to fund its subsidiaries until early December

During the Orbit merger talks, an audit of Swan’s 2021/22 accounts by Grant Thornton revealed a potential annual impairment of £178.4m in relation to its development plans.

The auditor said it had “insufficient assurance” on the level of impairment and that the landlord remains a “going concern” on the basis of a merger. 

As part of the new merger process with Sanctuary, Swan is now in discussions with the housing association to refinance the Orbit loan and replace it with a loan of its own.

If the talks are successful, Swan will become a subsidiary of Sanctuary.

Swan’s financial woes have continued to mount. It was revealed that the delay to publishing its annual accounts has led to a breach of a £250m bond it previously agreed. The trustees for this bond were M&G Trustees. 

In a statement to the stock market, the large investment firm said a breach had occurred under the terms of the loan agreement, as the landlord had failed to deliver its audited financial statements, including its balance sheet and profit and loss account.

M&G Trustees said the breach will “constitute a borrower default under the loan agreement if it continues for the period of 30 days”.

M&G acknowledged that auditors were unable to complete their audit of Swan’s accounts for the financial year up to March 2022, because of the collapse of its merger discussions with Orbit. 

The financial audit will be finished if the merger with Sanctuary goes ahead, which is due to be completed by 30 November, subject to satisfactory due diligence.

In response to reports of Swan’s financial position, the Regulator of Social Housing said: “We are working closely with Swan and Sanctuary as they take the deal forward and are fully engaged in the process.”

The financial problems follow a number of ambitious development projects the landlord has taken on over the past few years. 

In 2017, Swan replaced L&Q on an £800m scheme in Essex to deliver up to 2,850 new homes, with around half using modular construction.

In October 2020, Swan entered into a 15-year agreement on its second modular factory, to expand its modern methods of construction offering.

Swan partnered with Panattoni, the largest developer in Europe, on this factory in Basildon, which is expected to deliver 1,000 homes each year.

At 116,841 sq ft, the new factory is considerably larger than its first, which was opened in 2017 and covers 75,000 sq ft.

In May, Swan pulled out of a partnership with Catalyst, the G15 landlord, to deliver 359 shared ownership homes on an industrial site in east London. 

In the same month, it emerged that Swan had breached the Home Standard. It was found to have around 1,500 overdue fire-safety remedial actions.