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THFC prices first bond since end of government guarantees

The Housing Finance Corporation (THFC) has priced its first bond in four years, following the end of the government’s programme of guaranteeing housing association debts.

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THFC prices first bond since end of government guarantees

THFC had been providing cheap debt to housing associations under the Affordable Housing Finance (AHF) programme for years, but with the programme coming to an end, it has returned to its own bond programme.

The new bond involves THFC adding additional £186m of debt to an existing bond. The existing bond was first issued in October 2011 and at £625m, it was already the largest housing association bond in the market.

The tap was priced at 1.2% above government borrowing rates, resulting in an effective rate of 3.07% for the 26-year transaction.


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THFC lines up bond issue as government guarantees endTHFC lines up bond issue as government guarantees end
THFC prices first bond since end of government guaranteesTHFC prices first bond since end of government guarantees

While competitive with housing association deals, this represents a mark-up on the rates of between 0.2% and 0.3% AHF secured under the government guarantees programme.

Bromford Housing Group and Liverpool Mutual Homes (LMH) have been allocated £93m of the total, with Bromford taking £55m and LMH £38m. THFC has retained the other £93m which it intends to use to satisfy what it predicts will be rising demand in the rest of the year.

Piers Williamson, chief executive of THFC, said: “This deal marks a welcome return for us to writing core business. The AHF programme has been our preoccupation for the past four years, but it could not fulfil some funding needs, such as refinancing. Coming back to the THFC bond programme has allowed us to maximise some features to mitigate perceived inflexibilities like cost of carry and security efficiency.”

Mr Williamson also highlighted perceived changes in the finance market since THFC last issued: “We estimate [housing association] refinance needs have doubled in the past couple of years to a global total of circa £2bn per annum. Associations are more actively trying to protect legacy bank credit agreements and at the same time create new flexibilities, ultimately permitting them to deliver more badly needed affordable homes.”

Lee Gibson, financial director at Bromford Housing Group, added: “We are very pleased with the service that we received from THFC and the rate secured. Bromford will be using the [debt] to develop new homes, which is part of the programme to deliver 5,311 homes over the next five years.”

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