THFC issues £131m bond
The Housing Finance Corporation has issued a £131 million bond on behalf of ten housing association borrowers, breaking the 5 per cent yield barrier.
The overall yield of 4.94 per cent came on the back of continuing low rates on gilts - the government’s underlying borrowing rate. Since 2006, only £180 million of £3.6 billion worth of housing association public bonds have yielded less than 5 per cent.
Pricing on the deal was around 200 basis points over gilts - 20 basis points higher than on the last THFC issue in October 2011, of which this is a follow-on issue, known as a ‘tap’.
Piers Williamson, chief executive of THFC, said the higher spread was a result of low underlying funding costs combined with the lack of availability of bank lending to the sector.
‘Sterling investors are no fools,’ he commented. ‘They know that housing associations are increasingly looking to the capital markets as banks are no longer prepared to do long term deals
‘This reflects the new reality for associations.‘They can still do funding deals that most banks and many sovereign nations can only dream of.’
The largest participant in the bond was Dumfries and Galloway Housing Association, which took a £40 million share.
Other associations taking part include Cadwyn, Charter Housing Association, Connswater, Fold, New Gorbals, the Salvation Army, United Welsh, West Kent and Womens Pioneer.