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Midlands housing association issues £50m retained bond at ‘record low’ yield

An East Midlands housing association has issued a retained £50m bond at what it claims is the sector’s lowest ever all-in cost for a long-dated transaction.

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Picture: Getty
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Midlands housing association issues retained bonds at “record low” yield #ukhousing

An East Midlands housing association has issued a retained £50m bond at what it claims is the sector’s lowest ever all-in cost for a long-dated transaction #ukhousing

Futures Housing Group, which owns around 10,000 homes, priced the deal on 17 June at a yield of just 1.741%.

The spread over gilts – the government cost of borrowing – was 115 basis points (bps).

The £50m was retained from a £200m, 25-year bond issued by Futures in February 2019 at a spread of 166bps and a coupon rate of 3.375%.

Futures issued the bond through its finance subsidiary, Futures Treasury plc, and completed the deal on 24 June.

It aims to use the funds to help achieve its target of building at least 1,200 homes by 2024.


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Sangita Surridge, finance director at Futures, said it was an “outstanding result in the middle of what is a very challenging time globally and for our sector”.

Mike Stevenson, chair of Futures, said: “This is a tremendous outcome and reflects the robust strength of our business, our fantastic track record and our ambition to grow and to continue to develop new homes at pace.

“These funds will not only fuel the construction of even more new homes, but will also help us to improve our environmental sustainability in the longer term.

“Meeting housing need is our underlying purpose and this fresh injection of funding will help us do exactly that.”

Several housing associations have sought to take advantage of low interest rates amid the market uncertainty of coronavirus.

Large North East landlord Karbon Homes last week announced it had issued £100m of retained bonds at an all-in rate of 1.94%.

Savills Financial Consultants acted as treasury advisor on the Futures deal, while NatWest Markets was bookrunner.

Mike Roche, director at Savills Financial Consultants, said: “While external factors related to the current COVID-19 pandemic undoubtedly played a part in this result, the strong investor appetite for the bond was also a testament to the strength of Futures’ business, its response to the current situation and its plans over the coming months and years.”

Futures is rated A+ with a stable outlook by Standard & Poor’s.

Jargon buster: bonds and tap issues

Jargon buster: bonds and tap issues

Bond: Bonds are essentially tradable IOUs issued by companies, governments, housing associations, or others, in order to borrow money on the capital markets.

The ‘coupon’ on a bond is the interest rate that the issuer pays annually on the face value of the bond.

Gilt: The price the government pays for its borrowing.

The spread over gilts is the cost the borrower pays over and above what the government is currently paying.

The cost of government borrowing is used as a baseline because it is considered low risk by investors. The spread is often therefore seen as a measure of an organisation's creditworthiness.

All-in: The total cost of the debt to the bond issuer, ie, the interest rate paid.

Tap issues: Used to raise more money on the same terms and conditions as a previously issued bond- but the price may alter.

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