Consortium lacks capacity to borrow after two landlords drop out
Plans for first Welsh bond scuppered
Plans for a Welsh social housing bond have suffered a setback after two participating landlords joined a rival bond issue.
A consortium of seven Welsh housing associations, working alongside Community Housing Cymru which represents associations in Wales, has been in talks with the Housing Finance Corporation since early last year to raise £75 million on capital markets.
But two of the original seven participants abandoned the bond plan and joined a different £131 million club bond issued last week by THFC, which featured 12 other housing associations.
Cadwyn Housing Association, which owns 1,170 homes, and 5,000-home Charter Housing Association raised £3 million and £5 million respectively in last week’s THFC issue. Wayne Fox, finance director of Seren Group, which includes Charter Housing Association, said the association joined the alternative bond to access money more quickly. ‘We were still waiting for there to be enough interest to put together a Welsh bond,’ he added. ‘We might still look at one another time.’ The bond was priced at 205 basis points over gilts - the underlying cost of government borrowing - with an all-in cost of 5.37 per cent.
Piers Williamson, chief executive of THFC, said the prospect of a Welsh bond was now unlikely as the ‘capacity has been taken out’ of the original group, meaning the remaining landlords do not have sufficient stock to borrow against. Bonds typically need to be worth at least £35 million to attract investors at cheap rates.
But Nick Bennett, chief executive of Community Housing Cymru, maintained raising bond finance was still an option for Welsh landlords.
‘We will never say never to the idea of a Welsh bond and we are still working with the Welsh Government on the concept. What is really important to us is that there’s access to the bond market for CHC members,’ he said.
Gareth Hexter, finance director at United Welsh Housing Association which was one of the seven associations originally involved in discussions about a Welsh bond, said his organisation was ‘still interested in bond issues’.
THFC’s latest bond was issued just two days before Sanctuary Housing raided the capital markets with the biggest own-name social housing issue of 2012 (Inside Housing, 20 April). The £300 million bond will be used to help the 79,000-home landlord deliver more than 5,000 affordable homes.