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Places for People issues €150m worth of bonds
Giant housing association Places for People has issued €150m worth of bonds in two deals struck last week.
The association, which is the largest in the UK, borrowed €100m at an overall interest rate of 2.5% over a period of 20 years. It also borrowed a further €50m at an overall interest rate of 2.32% over 15 years, according to two updates it made to the stock market.
This meant that it borrowed the €100m at 2.06% more expensive than the current yield on the euro for borrowing over 20 years, and the €50m also at 2.06% when compared with euro yields for 15-year borrowing.
Places for People is unusual among UK housing associations in that it often raises money in euros, a policy it began just over five years ago. This is part of a strategy to diversify its debt portfolio in order to manage risk.
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In this case it was able to access much cheaper funding when compared with other housing associations that have issued bonds recently, as a result of yields on the euro being significantly lower than on the pound.
This was despite those housing associations generally being able to achieve costs closer to the costs of UK government borrowing, that is with lower ‘spreads’.
Home Group, for example, raised £350m in March at a fixed rate of 3.24% over 24 years at a spread of just 1.7%. This was itself cheaper than previous bond issues.
A week earlier, Bradford-based Incommunities raised £250m at an all-in rate of 3.25% and a spread of 1.57%. Earlier in the month, Metropolitan Thames Valley raised £100m at 3.24% and a spread of 1.75%, and Futures Housing Group raised £310m at 3.375% and a spread of 1.68%.
Howard Webb, director at Link Asset Services, told Inside Housing that the yield for the euro tends to be lower due to the UK generally experiencing higher inflation.
He said it was possible that Places for People had achieved lower borrowing costs due to borrowing in euros, but added: “There would have been currency swap costs that would have eroded some of the difference. In theory, the currency swap costs should eliminate the difference.”
Places for People declined to comment.
