Aster issues £250m of 9.5-year bonds at 110bps over gilts

According to unaudited results for the year ended 31 March 2023, published in May, 84.3 per cent of the association’s properties with an Energy Performance Certificate were at Band C or above. The group has also been awarded £500,000 of grant funding through Wave 2 of the Social Housing Decarbonisation Fund, which it will use to raise more than 100 of its worst-performing homes to this level during the next two years.

Bookrunners on the bond were Barclays and Lloyds, with funders’ valuation from JLL.

Public debt capital markets issuance by housing associations has been scarce in calendar year 2023, even as the wider sterling market has opened up, with providers mainly turning to bank debt or arranging private deals with capital markets investors.

Asked what it was like going out to the markets in a public deal amid the recent volatility, Chris Benn, chief financial officer at Aster, told Social Housing: “The macro-economic environment of course makes for a more challenging market, and we made some small adjustments to our approach to reduce risk – for example, opting for single-day marketing.

“But overall, investors remain positive about the social housing sector. Reaction to the transaction was good and the book built steadily, attracting a number of new investors to the sector, which is really positive to see.”

The number of investors participating was not disclosed.

Mr Benn said that the 9.5-year tenor was “one of the characteristics of the issuance that attracted new investors”, and it also suited the group’s objectives.

He added: “We’re pleased with the outcome, which was very much in line with our expectations. We achieved a margin above the reference gilt of 110bps, which to our knowledge ties with one other issuance as the tightest spread of any own-name public sterling deal in 2023.”

The fundraising exercise was planned to support the group to deliver the next phase of its development pipeline, the CFO said.

“We have an ambitious programme to build 10,000 new energy-efficient affordable homes in seven years and this funding will play a crucial role in supporting that,” Mr Benn said. 

Aster’s recent unaudited trading update showed that it delivered 1,352 new homes during the year, of which 698 were for affordable rent, 466 were shared ownership, 17 were for market rent and 171 were sold on the open market.

The report noted that build cost inflation pressures “continue to be a concern”. It added: “[Although these] have eased, we don’t expect to return to normal levels of inflation for some time. However, as the majority of our programme is developer-led (fixed price) our exposure is limited.”

The unaudited figures showed a turnover of £301.2m, and an operating profit of £68.1m, compared with audited results of £240.9m and £74.9m respectively last year. 

Profit before tax for 2023 was £54.8m – down from £170.6m in 2022, but both year’s figures were impacted by gain on acquisition relating to mergers. These stood at £12.6m in 2023, relating to the arrival of Enham Trust, on 1 October, and £119.4m in 2022, relating to the acquisition of Central and Cecil Housing Trust.