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London housing association secures £250m bond amid market volatility

Large London housing association Optivo has issued a £250m bond with £100m retained despite volatile markets.

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Picture: Getty
Picture: Getty
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London housing association places £250m bond amid market volatility #ukhousing

“If we’d met investors one week earlier we might have priced a whole 1% cheaper. But the world looks and feels very different to how it did a month ago,” says chief finance officer on Optivo’s new £250m bond #ukhousing

Optivo received interest from 40 investors totalling £1bn and was able to issue a 15-year fixed rate bond with an all-in coupon of 2.857%. The money was borrowed at 230 basis points over gilts – the cost of government borrowing – despite the process starting at 250 basis points over gilts.

The issue comes weeks after Optivo’s initial roadshow for the £250m bond, which the association aims use to fund 15,000 new homes over the next decade.

Optivo said it represents only the second sterling corporate bond issue since the coronavirus crisis “took hold” at the start of March. Chief finance officer Sarah Smith admitted that a cheaper deal could have been achieved if they had gone to market just a week earlier.

Ms Smith said: “Since then we’ve been waiting and watching, weighing up our options. While gilt yields have tightened, credit spreads have widened considerably over the past few weeks. And, globally, corporates have been issuing new bonds with considerable concessions to secondary spreads.”


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She added: “If we’d met investors one week earlier, we might have priced a whole 1% cheaper. But the world looks and feels very different to how it did a month ago, and given the opportunity to secure long-term funding in this environment we’ve taken it.”

Optivo currently owns and manages more than 45,000 homes across London, the South East and the Midlands.

Ms Smith added: “This bond issue puts us in a fantastic place to continue investing in social housing when the time is right, and to make the most of opportunities as they come along. The bond sale increases our available funding headroom to over £650m.”

Optivo follows large associations Clarion and Sovereign who have both issued bonds in recent months, worth £350m and £375m respectively.

Ms Smith said the association has paused new land acquisitions over the last month but expects to resume building at all existing sites when it is safe to do so.

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