Bromford achieves lowest HA spread of 2018 on debut £300m bond issue

Home26 Apr 2018Gavriel Hollander

Bromford has priced its first own-name bond at the narrowest spread for long-term money achieved so far in the housing sector this year.

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Bromford achieves lowest spread of 2018 on debut bond issue

Bromford raises £300m on capital markets

Bromford’s £300m bond to fund development pipeline

The 30-year £300m issue was bought by investors at 135 basis points over gilts, giving an all-in cost of 3.25 per cent. Last week the UK’s biggest social landlord, Clarion, issued a £250m bond at 137 bps over gilts.

The bond was more than twice oversubscribed, with £650m of total orders. Of those, £527m was ordered at the ultimate price of 135 bps.

The new funding will take the average cost of debt for the 29,000-home landlord from 4.4 per cent to around 4.1 per cent.

“A key motivation for going to the bond market is to try and drive down that average cost,” Lee Gibson, Bromford’s executive director of finance, told Social Housing.

As of March 2017, the association had £721m of funding, £567m of which was already drawn. Mr Gibson said this was “predominantly bank funding from half a dozen or so banks”, with the remainder a mix of private placements, and funding from The Housing Finance Corporation and the European Investment Bank.

The money has been raised to help fund Bromford’s ambitious development programme, under which it plans to build 1,000 extra homes per year.

That programme needs funding of between £100m and £125m a year on top of its operating surplus, meaning that Bromford could go back to the capital markets within the next two or three years.

“Our bond programme is to fund the next couple of years of that [build] programme,” said Mr Gibson. He added that Bromford would continue to use bank facilities for “day-to-day” funding.

“We have a clearly defined treasury strategy which is based on long-term fixed-rate monies to fund the operational cash required for the business. We’ll then use flexible bank funding such as revolving credit facilities to have available facilities to meet day-to-day demands and our treasury policy.”

Mr Gibson said that Bromford aimed to have cash and available facilities to cover 18 months’ worth of business activity, equating to £150m-£170m.

“What you want for that are revolving credit facilities, not drawn cash or bond funding,” he added.