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Aggregator issues £250m debut bond
A new £2bn capital markets aggregator set up by The Housing Finance Corporation (THFC) has issued its £250m debut bond for three housing associations.
Blend has provided the funding for Fortis Living, a 15,000-home landlord based in Worcestershire; Wales & West which manages 11,500 homes across Wales; and Waterloo Housing Group, which has 27,000 properties across central England, in a 29-year agreement. Fortis and Waterloo are in merger talks.
The interest on the bond was priced at 1.58% higher than the cost of government bonds (gilts) and had a reoffer cost of 3.45%, meaning it was priced slightly higher than Peabody’s £450m bond, which was issued last week at 1.55% more than gilts.
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Piers Williamson, chief executive of THFC, said: “While demand for the deal was strong, in the lead up to Brexit, institutional investors have seen a concentration of housing association issues and, perhaps unsurprisingly, a dearth of alternatives such as property or infrastructure deals – as investment decisions are deferred.”
He explained that this means investors can demand a higher price for their investment.
Blend’s model, which allows housing associations to access money in a way which is more like an own-name bond issue than borrowing through THFC, took 18 months to develop, he said. Borrowers do not need a public rating to take part in the aggregator, instead just needing to undergo a private ratings assessment.
Moody’s has given the issuer an A2 rating on the back of its underlying participants, although said this could be downgraded because of the merger plans.
The deal is the first in Blend’s £2bn Euro Medium Term Note (EMTN) programme, a model designed to give it flexibility to issue bonds with different maturities.
