Tuesday, 21 October 2014

Association taps bond market for £124m

Circle Anglia has raised £124 million on the UK bond market to fund its development plans.

The bond had a cost of funds of 5.39 per cent and a spread over gilt (the price over government bonds) of 110 basis points, making it more expensive than a £120 million issue by Sanctuary in September, which had a cost of 4.87 per cent and a spread of 100 basis points. This ends the recent trend for continuously falling bond prices in the sector.

Circle Anglia’s bond was a tap issue of a £275 million bond issued in October 2008, which had a higher cost of 7.3 per cent and a spread over gilt of 2.7 per cent.

A tap issue is used to raise more money on the same terms and conditions as the original bond but the price may alter.

A Circle Anglia spokesperson said the issue, the first in the sector without a bank’s involvement, will be used to invest in the 61,500-home group’s development and regeneration plans. The association currently has 2,700 homes in its development pipeline, which runs until 2013.

Calum Mercer, executive director of finance at Circle Anglia, said: ‘We are pleased to have secured additional long-term funding for Circle Anglia at a time when the need for housing associations to innovate to deliver more is crucial. 

‘Investors have recognised our very strong long-term track record of successfully executing on our strategy of combining commercial success with social purpose.’

Trade Risks acted as the arranger and sole book runner for the bond issue.

A Trade Risks spokesperson said: ‘The bond was issued at 110 basis points over gilts, which is the same level as the last Aa3 rated housing association issue from Notting Hill Housing Trust. 

‘This was in spite of the more difficult conditions within the European debt markets and with investors still digesting the implications of the UK government’s recent comprehensive spending review on the housing sector.’

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