Paragon secures £250m bond at record all-in cost of 3.626%

Paragon, which has 9,000 units located in Surrey and south west London, achieved a credit spread of 140 basis points on the 32-year funding, priced over the 2044 reference gilt.

The coupon on the deal was just 3.625 per cent after attracting bids from 28 investors, of which 19 were successful.

It marks the lowest rate for a housing association own name bond.

Paul Rickard, who joined Paragon as its finance director from Circle in October 2014, said: ‘The low gilt environment coupled with the credit strength of Paragon has resulted in a record low coupon that will help us to deliver our aspirations.’

The transaction includes £25m of retained funding, which it can sell to investors at a later date.

Bookrunners on the deal were Lloyds and RBS, while Devonshires was the RP’s legal adviser. Centrus acts as Paragon’s funding adviser. Trowers and Hamlins advised on the security side.

It comes after the group was assigned an A2 credit rating with stable outlook by Moody’s, which the agency said reflects the group’s ‘consistently strong historical financial performance’ and operating margins higher than the Moody’s-rated peer average.

The money will be used for partial refinancing and new development. The deal includes standard asset cover at 105% EUV-SH and 115% MV-T.

The deal follows a string of own-name, publicly listed bonds in November 2014, which included Riverside Group’s £250m deal at a ‘record-low’ coupon of 3.875 per cent and 135 basis points over the reference gilt.

The same month saw Scotland’s biggest landlord, Wheatley Group, raise £300m on the bond market - including £50m retained - at 160 bps over the gilt and an all-in cost of 4.42 per cent.

Yorkshire Housing entered the bond market with a £200m issuance, including £60m retained, at an all-in cost of 4.23 per cent. Herefordshire Housing Limited (HHL) also secured £120m of funding at 138 basis points over the reference gilt and an all-in cost of 4.193 per cent.

Before this, in October 2014, the Guinness Partnership had issued £250m of bonds, including £100m retained, at 130 bps over the gilt and a coupon of 4 per cent.

In December 2014, First Wessex achieved the first forward fix and a ‘record low rate’ via the Affordable Homes Guarantee Programme. It locked into an average rate of 2.7 per cent, fixed for 20 years, on £57m of funding.