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More cheap European borrowing as AHF lends £152m
Three housing associations have borrowed a combined £152m from the government-backed Affordable Housing Finance programme, with some funds raised at cheaper rates than government borrowing.
Paradigm, which manages 14,000 homes, is set to borrow £35m at a fixed rate of 1.939%, 0.01% below the cost of UK government borrowing, using funds from the European Investment Bank (EIB).
Meanwhile, 6,000-home Bracknell Forest Homes will borrow £25m from the same source on a floating rate, meaning the interest rate changes over time, tied to the London interbank offered rate (Libor) plus 0.201%.
AHF, which manages a soon-to-finish £3.5bn government programme of guaranteed debt, has a £1bn loan from the EIB, most of which has already been drawn down.
The EIB facility has historically been a source of cheap borrowing for UK housing associations, as the bank passes on its own AAA rated cost of funds. Future funding from the EIB, however, has been in doubt since the UK voted last year to leave the European Union.
AHF also priced a £92m bond tap in its own name, split between five housing associaions: Adactus, Merlin, Stonewater, Golding and Flagship. This was priced at 0.28% above the cost of government borrowing, the cheapest borrowing achieved by the programme without using EIB funds since its inception. It had a reoffered cost of 2.14%.
Andrew Lovelace, executive director of finance at Paradigm, said: “Thanks to the partnership [The Housing Finance Corporation (THFC)] has developed with our organisation and with the sector in general, we have been able to benefit from their expertise and support to complete a £35m funding round at extremely competitive rates.”
Piers Williamson, chief executive of THFC, said: “With these two transactions priced since Moody’s sovereign downgrade, and a further transaction announced for Catalyst Housing, there is early evidence of own name bond credit spreads widening. However, it’s difficult to single out how much of the widening is down to perceived increased sales risk for individual HAs and how much is down to more general sector and economic concerns.”
£321.5m remains in AHF’s EIB facility, which will all be allocated by the end of the year. It also has £50m of retained bonds to lend.
