Sanctuary bond raises £300 million
Sanctuary Housing has become the latest social landlord to access the capital markets with the largest bond issued so far in 2012.
The 79,000-home landlord has raised £300 million through a 30-year bond. It will take the total amount of money raised on the capital markets in 2012 beyond the £1 billion mark - already more than was raised in the whole of 2011.
Industry insiders had predicted the Sanctuary bond would be priced somewhere between 170 and 190 basis points over gilts - the underlying cost of government borrowing. At current rates, that would give an all-in borrowing cost of between 5 per cent and 5.2 per cent.
The bond follows a glut of similar capital raising exercises from major landlords. Last month, 66,000-home London & Quadrant issued a 21-year bond, raising £250 million at an all-in rate of 4.62 per cent - the cheapest ever issued by a housing association. It follows other bonds from Amicus Horizon, Circle, Hastoe and Radian this year.
The Housing Finance Corporation this week also issued a £131 million ‘tap’ bond for 14 participant landlords, priced at 205 basis points. A tap is a bond tagged on to a previous issue with the same terms, but, potentially, different pricing.
Piers Williamson, chief executive of THFC, said he anticipated around £2 billion worth of bond issues in 2012, representing twice as much as has been raised on the capital markets in any previous calendar year.
‘The perception [from investors] is that there’s a wall of supply this year,’ added Mr Williamson, referencing the absence of traditional bank lending as the reason for the glut of bond deals. ‘We will see the same again for the next couple of years.’
Sanctuary last raised money on the capital markets in September 2010 with a £120 million tap of a £200 million bond from March 2009. The latest bond will be used to help finance an extensive development programme.
Craig Moule, group director of finance at Sanctuary, said the money raised would ‘contribute towards Sanctuary’s £750 million UK-wide development programme over the next four years’.
The Homes and Communities Agency awarded Sanctuary almost £90 million in grant funding to develop 3,689 homes as part of its 2011/15 affordable homes programme. It represents the biggest contract signed under the £1.8 billion programme.
Social landlords and the capital markets
total raised on the bond market in 2011
average spread over gilts of social housing bonds issued in 2011
total raised on the bond market so far in 2012 (as of 16 April)
average spread over gilts of social housing bonds issued in 2012 (as of 16 April)