Association hails cheapest bond issue in more than five years
Notting Hill issues £180 million bond
Notting Hill Housing Trust has raised £180 million in the lowest priced bond issue by a housing association for more than five years.
The interest rate was 5.3 per cent, 110 basis points over gilt (the price of government bonds).
The cost of borrowing was therefore lower than the 5.5 per cent achieved by London & Quadrant in a £300 million bond issued in January and suggests investors are becoming more confident about investing in the UK housing association bond market.
Consultancy Traderisks arranged the bond on behalf of NHHT with Barclays and Santander acting as joint book runners.
Paul Phillips, group finance director of NHHT, said: ‘We are delighted that investors have shown confidence in Notting Hill’s business plan as well as of the credit quality of the sector and supported this issue so positively.’
The bond will be used to reduce NHHT’s capital costs and help finance plans to build more than 1,000 new homes a year.
Piers Williamson, chief executive of the Housing Finance Corporation, which issues bonds on behalf of associations, said he was surprised NHHT achieved a better interest rate than L&Q. He said: ‘It is a good deal. Nobody would have predicted this pre-election. They hit the market at just the right time. The markets are thinking that UK PLC is a better place to invest than Europe.’
Mr Williamson said he is in talks with several associations about bringing forward bond issue plans to capitalise on the market conditions following NHHT’s deal. He pointed out though that the spread over gilt, (the interest rate minus the price of government bonds), was higher than the 105 basis points THFC achieved for a £72 million bond deal for a trio of Northern Ireland landlords in March.
The spread is used as a means of calculating relative pricing of bonds, with lower spreads indicating higher rates of investor confidence.
Bond dealer Andy Sweeney, director at the Royal Bank of Canada, said: ‘Banks look at the credit spread, while housing associations look to keep the cost of borrowing down and want a low interest rate. NHHT did very well, but the spread could have been a bit tighter.’
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Readers' comments (2)
Dave Hollins | 09/07/2010 12:35 pm
Has anybody told Barclays and Santander that Grant Shapps wants to get rid of the regulator?
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Sidney Webb | 09/07/2010 3:41 pm
Or indeed that the entire framework for agreeing to development has been passed over to the nimby faction - this may be a dampner on achieving the development targets at the centre of the financial strategy.
Still - well done NHT - we'll watch the space where the houses are meant to appear in, and hope that the majority end up meeting social need!
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