Bond market boom attracts new player

GB Social Housing is to launch amid a surge of interest from social landlords looking to raise finance through the bond market. Over the past 12 months around £1.1 billion was raised through bond issuance, compared with £985 million the previous year.

The new firm - which is managed by Cutwater Asset Management - will issue aggregated bond deals for UK housing associations, following a similar structure to THFC’s model. GBSH expects its first bond deal to raise around £200 million after officially launching on 9 March.

Gerhard Oberholzer, managing director of Cutwater Asset Management, said: ‘We will focus on the organisations which can’t, or don’t want to enter the bond market on their own.’

Despite plans to target smaller housing associations, Mr Oberholzer said it was ‘not closed’ to doing deals with large organisations.

Piers Williamson, chief executive of THFC, said GBSH’s success would depend on the terms it sets out with housing associations.

Bond sector insiders warned of the firm’s links to the monoline insurance industry, whose firms guarantee timely repayment of bond principal and interest when an insurer defaults. These firms have suffered huge losses over the past few years. Monoline insurance firm MBIA restructured its fixed-income asset management arm as Cutwater Asset Management earlier this year. However, GBSH said that the insurance companies made up only a small part of the assets it managed.

Mervyn Jones, director of portfolio management, housing investment and consultancy at Savills, said much would depend on the flexibility of GBSH’s arrangements.

‘When I was chief executive at Willow Park Housing Trust we did one of the first bond deals in the early 1990s. As our business model evolved, the terms of the bond did not, which was a major constraint on our development,’ he added.

Waqar Ahmed, finance director at London & Quadrant, said the launch was proof that the social housing finance market was placing greater emphasis on bond finance.

He said: ‘A decade ago club issuances were the norm and it is only the recent surge in lending from banks that changed the market. If the firm’s fee structure is comparable to its rivals then there is room for another player.’

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