Friday, 18 April 2014

Largest own-name bond issue ‘excellent news’ for the housing sector

Big bond success

Affinity Sutton has raised £250 million through the first bond issue by a single housing association in five years.

The deal is the largest own-name bond ever issued by a housing association, according to RBC Capital Mar­kets, which underwrote and arranged the transaction. Mark Washer, group finance director at Affinity Sutton, said the bond issue was ‘excellent news’ for the sector, at a time when the credit crunch had caused traditional sources of funding to dry up.

‘It seems to be the case that there are only one or two banks left lending to the sector on any scale – and a lot of the business they’re prepared to do is only for existing customers,’ he said.

‘It’s a pretty serious situation for the sector, when it comes to getting anywhere near meeting the government’s expectations in terms of delivery of affordable housing. What this demonstrates is that the capital markets are still there for the sector.’

RBC said the order book for the deal, rated AA2 by ratings agency Moody’s, was oversubscribed. Phil Jenkins, director of global infrastructure at RBC Capital Markets, said: ‘The book for this deal is as strong as we have seen for some time in any sector, confirming that the sterling bond market is open to high quality [social landlord] borrowers.’

Affinity Sutton is one of several associations known to have been preparing bond issues over the summer.

Mr Washer said he ‘fully expected’ a further three or four associations to follow its lead in the next 12 to 18 months. The market for social housing finance has been dominated by a plentiful supply of cheap bank loans for years. But the credit crunch has reduced the small pool of lenders active in the sector and pushed their prices closer to those available in capital markets.

Affinity Sutton’s deal follows an £80 million tap of an existing Housing Finance Corporation bond, on behalf of four borrowers. Mr Jenkins said the pricing of Affin­ity Sutton’s deal compared ‘favourably’ with the rates on offer from the banks. But he added that the real issue driving associations’ interest in the capital markets was the desire to ensure availability of funding.

Mr Washer said the central issue for them had been diversification of funding. ‘We have been clear for years now… that for social landlords with aspirations to grow, the bank markets are simply not big enough.

‘We have had a strategy of moving towards the capital markets for a long time. This was not a reaction to the credit crunch.’

He added that Affinity Sutton had about £200 million in undrawn bank facilities, which he estimated would cover its development programme for two to three years. The bond issue would increase its capacity to react to unforeseen opportunities, such as stock transfers.

The bond is the first AA-rated secured corporate bond to emerge from the sector.

Have your say

You must sign in to make a comment

sign in register



  • Don’t look back


    Britain built record numbers of homes during the depression of the 1930s, but nostalgia-fuelled dreams of recreating this building boom today are delusional

  • Housing association gets record price for bond

    8 May 2013

    A London housing association has achieved a record low bond price to raise £60 million.

  • THFC closing in on £500m guarantees deal with EIB

    17 October 2013

    The finance company tasked with securing £3.5 billion of loan guarantees for affordable housing is close to finalising its first £500 million facility with the European Investment Bank.

  • First affordable homes guarantee deal expected

    5 December 2013

    Housing minister Kris Hopkins is expected to announce the first deal under a £3.5 billion government guarantee scheme to lower the cost of development finance. 

  • Winning formula


    The housing sector should avoid knee-jerk reactions to credit reports and focus on keeping investors’ confidence


  • Luxury Lets


    A south west-based housing association is taking the unusual step of converting some of its properties into holiday homes. Alex Turner visits Bath to find out more

  • Global reach


    Off on holiday this summer? Perhaps you’d prefer to spend a longer stint abroad? Here, Caroline Thorpe speaks to housing professionals based overseas about how their UK experience has gone down among employers on the other side of the world

  • Changing lives


    The Andy Ludlow Awards celebrate the very best homelessness services in London. Simon Brandon reveals this year’s winners

  • Taking the heat

    1 May 2013

    Following the Lakanal House inquest, Kerry Gwyther, partner at law firm TLT, examines how landlords should review their fire safety practices

  • Keep it in the family


    A housing association in Birmingham is tackling rising unemployment by pledging to fill 10 per cent of its job vacancies with its own tenants. Austin Macauley reports