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Aggregator completes ‘sector-first’ deferred deal and attracts investment from trio of sovereign wealth funds
Social housing bond aggregator Blend has completed a series of transactions, including the “sector’s first” aggregator deferred bond and a separate £100m bond tap that received investment from sovereign wealth funds.
Blend, part of The Housing Finance Corporation (THFC), has priced £100m of retained bonds including two deferral pools for Cobalt Housing and Walsall Housing Group – the first deal of its kind according to THFC.
The aggregator said the transaction represents a “watershed moment” for the sector, with £75m being deferred for 12 months at 2.26%, a spread of 148 basis points (bps) over gilts – the government cost of borrowing.
The other £25m will be deferred for six months and was priced at 2.21% for a spread of 143bps.
It follows Blend’s separate £100m bond tap for 37,000-home Torus housing association last week, which attracted three sovereign wealth fund investors – including non-European funds – and one major UK pension fund. The 34-year loan achieved an all-in rate of 2.17% at a spread of 133bps over gilts.
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Piers Williamson, chief executive of Blend and THFC, said the deferred deal was a “significant development for the sector.”
He added: “With no foreseeable easing of political and COVID-related uncertainty, we know that deferred drawdown can provide a buttress for HAs’ business plans and mitigate funding risk and carry costs, so the sector can continue with their commitment to build even more badly needed affordable homes.”
Mr Williamson said the transaction represents a competitive alternative to private placements, with the deal being priced 25bps inside of typical private placement levels.
Richard Nowell, WHG’s treasury manager, said: “The inclusion of deferred drawdown under the Blend model means WHG can take advantage of current market conditions to secure the funding we need in the future, and is a positive development for the affordable housing sector.”
Inside Housing previously reported that deferred drawdown deals may become more attractive, should interest rates continue to fall or even become negative. The Bank of England this week wrote to banks asking them about their preparedness for negative rates.
