LSVT raids bond market for £225m

Saxon Weald, a 5,900-home landlord based in Horsham, West Sussex, became the first LSVT to refinance its bank loans through a bond issue.

Chief executive David Standfast said the move had seen it ‘break out of the straightjacket’ of having to re-arrange its existing loan book when it needed to raise new money.

The bond was taken up by 13 investors and was oversubscribed by £130 million. It was priced at 5.375 per cent over 25 years with a spread over gilts – the government cost of borrowing – of 248 basis points, or 2.48 per cent.

The association’s previous bank loans with Royal Bank of Scotland, Lloyds, Santander and Newcastle Building Society included long term debt priced at more than 7 per cent.

Unusually for current housing association bonds, Saxon Weald’s was an ‘amortizing’ bond, meaning that one fifth of the borrowed sum is repaid to investors every 2.5 years between year 20 and 30, instead of one ‘bullet’ repayment.

Mr Standfast said that the bond gave his organisation enough cash to develop the 341 homes it has pledged to deliver as part of the Homes and Communities Agency’s £1.8 billion affordable homes programme.

‘We’ve got the money now to build for our HCA programme but have also got the ability to do more,’ added Mr Strandfast.

He said that the landlord wanted to develop around 200 homes a year and was able to do so with no funding from the HCA.

Tom Paul, an associate director at TradeRisks, which advised on the bond, said that the Saxon Weald deal could lead to other LSVTs looking at similar refinancings.

‘It would be surprising if other don’t follow their lead,’ he said.