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Housing association strikes £190m bond deal to receive funds immediately after Brexit

Large housing association Moat Homes has agreed an innovative bond deal worth up to £190m to provide it with funds immediately after the UK is scheduled to leave the European Union.

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Picture: Getty
Picture: Getty
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Large housing association @moathomes has agreed an innovative bond deal that could provide it with up to £190m immediately after the UK is scheduled to leave the EU #ukhousing

Housing association strikes £190m bond deal to receive funds immediately after Brexit #ukhousing

South East-based Moat completed a forward purchase agreement to tap an existing bond, which is due to be repaid in 2041, for an extra £100m.

Under the agreement, it will not borrow the money straight away, but will receive it from investors on 8 November 2019, eight days after the date on which prime minister Boris Johnson has promised to take the UK out of the EU.

Moat, which manages 20,000 homes, will borrow the money at an overall interest rate of 2.58%. Moat did not disclose how much more expensive this was than the cost of equivalent government borrowing, but judging by the latest information from the market for a 20-year deal it would be about 1.57% more expensive.


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Historically, this is relatively cheap, but it is a wider spread than the two bonds issued by Accent Housing and Clarion Group last month, which both priced at 1.3% more expensive than the cost of equivalent government borrowing.

The interest rate will also generate an additional premium of £40m, meaning Moat will receive a total of £140m on 8 November.

It also plans to tap the bond again on that date for another £50m. That money will be retained to be issued at a later date, meaning its current plan will eventually provide it with £190m.

Greg Taylor, executive director of finance and corporate services at Moat, said: “We are delighted with the all-in rate we have achieved with this financing ahead of the uncertainties surrounding the potential Brexit date.

“This transaction is very security efficient for Moat since underlying security is required to support the principal amount only. These funds will support Moat’s development programme over the coming years.”

Housing associations borrowed a record £4.5bn in the three months before the first Brexit deadline on 29 March, according to figures from the Regulator of Social Housing, with sector figures telling Inside Housing they were raising money to be able to cope with a possible no-deal Brexit.

The past couple of months have again seen associations gradually ramping up their fundraising activities, as Mr Johnson’s pledge to see Brexit through on 31 October increases fears that the UK will leave the EU without a deal in place.

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