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Newly merged Notting Hill Genesis has issued a £250m bond, its first since merging last April to form a 64,000-home housing association.
It borrowed the money over a 10-year period at a cost of 1.73% more than the cost of government borrowing, with an all-in cost of 2.97%.
The bond mirrored a deal struck by the UK’s largest housing association, Clarion, earlier this month. Clarion also issued a £250m bond over 10 years, although it priced more cheaply at 1.48% more expensive than the equivalent government borrowing.
Credit ratings agency Fitch Ratings gave the Notting Hill Genesis bond an ‘A’ rating, saying it had given it the same rating as the housing association’s overall rating.
According to the agency, the money raised through the bond will be used to “refinance existing loan facilities”.
Fitch added: “The planned bonds will be secured by first fixed legal mortgages on housing properties owned by [Notting Hill Genesis], which have been valued by Jones Lang LaSalle on an existing use value for social housing and market value subject to tenancies basis.”
Notting Hill Genesis has a credit rating of A from ratings agencies Fitch and Standard & Poor’s (S&P), having stopped seeking credit ratings from rival agency Moody’s shortly after completing the merger.
Before the merger, Genesis had a lower rating than Notting Hill. Moody’s said in April last year that the merger would bring the two organisations’ ratings closer together and rated them both Baa1, which is the equivalent of two notches below Notting Hill Genesis’ Fitch and S&P ratings.
Prices of borrowing on the British capital markets have been rising in the past year or so, with both issuances costing more than, for example, L&Q’s 12-year bond priced at 1% more expensive than government borrowing in July 2017.
Finance experts have told Inside Housing that the increased prices are partly due to the ongoing uncertainty over the terms of the UK’s departure from the European Union.
Amid Brexit volatility, some housing associations have turned away from the capital markets and looked to US investors less encumbered by Brexit uncertainty.
The bookrunners on the deal were Barclays, HSBC and Santander.