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Aggregator asks shareholders for more money with first issue delayed
A new housing association bond aggregator has gone back to its shareholders to ask for more money to cover its running costs.
MORhomes, which has 61 housing association members, said at the start of 2018 that it would seek to issue its first bond in the spring or summer.
This timeline has been significantly delayed, with the organisation finding it difficult to arrange its various partners for the first issue.
Neil Hadden, chair of the aggregator, told Inside Housing: “Different associations have different requirements to borrow at different times, so trying to corral them and get them all in the same place at the same time takes a bit of work and that’s what we’ve been doing over the last few weeks.
“The whole thing has taken longer than anticipated when we set the company up in January.”
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He revealed that MORhomes has gone back to its housing association shareholders to ask for more money to continue paying for legal documentation and other costs before the first issue.
Originally, the aggregator had asked its member housing associations for £20,000 of share capital to cover its start-up costs but it has now had to ask for further funds. This is partly because the first issue has been delayed for so long.
Mr Hadden said: “We need to make sure the bond market is in the right state – it’s all over the place at the moment. We’ll go when the market’s right. It’s not going to be this side of Christmas now but we’ll be getting ready to go as soon as things are right, early in the new year.”
One bond market expert, however, told Inside Housing: “[The bond market] isn’t going to be any nicer until at least next March [after Brexit].”
They added: “[MORhomes is] a structured finance approach with a range of different credit grades of borrowers, effectively. In any aggregator, we see what we call adverse selection.
“The weak need the money the most, so they’re first in and they’re crying out for the money. But [this] construct requires the strong to cross-subsidise the weak.”
In the summer, MORhomes set up as a public limited company, enabling it to list bonds on the London Stock Exchange.
