An innovative restructuring for a £180 million mixed-use leisure project

Eversheds Sutherland has advised on the Poplar Baths Leisure and Residential Project

Eversheds Sutherland has advised Arlingclose and the London Borough of Tower Hamlets on the restructuring of the Poplar Baths Leisure and Residential Project, a residential and leisure regeneration of a public baths building, initially built on the same site in 1852.

Eversheds Sutherland’s Governments & Infrastructure sector team advised Arlingclose, the leading local government financial adviser, and the London Borough of Tower Hamlets, on a series of innovative changes to the Poplar Baths Leisure and Residential Project, a regeneration scheme which will now continue for the next three decades.

An expanded mandate, restructuring the 150 year old Poplar Baths site 

The team was initially instructed to advise on the proposed debt refinancing of the Project.  However, following the Covid-19 outbreak, and with the leisure services element in lockdown a more innovative approach was required to deal with economic uncertainty. The mandate was expanded to include a simultaneous partial handback of the leisure services to the LBTH.

The restructuring package is thought to be the first to feature both a refinancing and a partial hand-back of services at the same time and accommodate necessary changes as a consequence of Covid-19 within the SOPC4-based infrastructure space.

The team was led by Mark Dennison, Partner, and supported by Kate Shannon, Principal Associate, within Eversheds Sutherland’s Governments & Infrastructure sector team.

Mark Dennison, said:

“The refinancing of the residential element of the Poplar Baths PPP Project and partial handback of responsibility for leisure services element as a result of COVID-19 is thought to be a first in SOPC-based infrastructure.  While SOPC-based concession agreements include mechanisms to enable temporary solutions in the current COVID-19 environment, in many projects these mechanisms unfortunately serve only to kick challenges down the line.  We are pleased to have supported Arlingclose and Tower Hamlets on a scheme which addresses all parties’ long-term requirements up-front and lays a new foundation for uninterrupted project delivery over the next three decades.”

Mukhtiar Tanda, Head of Governments & Infrastructure, also commented:

“The conclusion of this restructuring is prime example of the innovative service delivery heralded by our new Governments & Infrastructure sector group.  The transaction avoids potentially significant disruption to many Tower Hamlets residents, and ensures this significant project of public benefit continues as planned. We are also particularly pleased that this project supports our vision of helping our communities to thrive.”

David Blake, Strategic Director at Arlingclose, said:

“The Council has managed to negotiate this refinancing in a difficult market, with volatile swap valuations, challenging criteria regarding replacement funding, and a ticking clock regarding existing debt and hedging arrangements. A reduction in payments with no disruption to services is a great outcome.”

Neville Murton, Corporate Director of Resources at London Borough of Tower Hamlets, also said:

“The support we received from our advisers was instrumental in bringing to a successful conclusion a deal fraught with difficulty following the COVID pandemic. All parties worked together to avoid the prospect of a termination event whilst at the same time re-casting the relevant risk responsibilities, reducing payments by the Council and ensuring that the TH leisure contract can, in the future, be procured singularly.”