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£2bn housing association bond aggregator prepares to launch
A new £2bn bond aggregator is preparing to launch as a subsidiary of existing aggregator The Housing Finance Corporation (THFC).
Blend, which already has three housing associations in its underlying pool of participants, will be a wholly-owned subsidiary of THFC.
The vehicle has been assigned an A2 rating from credit ratings agency Moody’s, which said that Blend will aim to provide bond market access to associations that don’t typically have the capacity to issue large enough bonds to access the capital markets in their own names.
This rating puts Blend towards the higher end of Moody’s social housing portfolio, which were all downgraded this time last year over the increased likelihood that the UK will leave the European single market.
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After that action, only the housing association Riverside was left with a higher rating than Blend, at A1. According to Moody’s, Blend’s first issue is expected this month.
The agency did not reveal who the three associations in the underlying pool are, but it did say that two of them are expected to complete a merger next month.
If the merger goes ahead, Moody’s said that it could end up downgrading Blend, if this resulted in “the erosion of the credit quality of the pool”.
Blend will be governed by substantially the same board as THFC, and will be managed by THFC Services, another of THFC’s subsidiaries.
THFC was established 31 years ago and currently provides finance to 145 housing associations. It also ran the government’s Affordable Housing Guarantee Scheme until it was scrapped.
In its judgement, the agency said: “The credit quality of [the programme] reflected the strong market experience of the issuer’s management team.”
It added: “Moody’s considers that the strong experience of the management team partially offsets the start-up risk of the entity, which will also have limited reserves as the predominant source of income will be the arrangement fee and annual management fee to borrowers.”
Blend’s launch comes as a rival aggregator, Morhomes, is expected to launch its initial £1bn bond soon.
In July, Morhomes told Inside Housing that it was “fully set up” for that issue, having successfully registered as a listed company.
Many in the sector expect there to be a busy end to the year in the bond market, with housing associations still looking to secure more funding to deal with their increased development ambitions.
