Blend becomes first sector issuer to return to markets, with £107m tap

News07 Mar 2022Sarah Williams

Blend has become the first social housing issuer to return to the bond markets after the Russian invasion of Ukraine caused a temporary shutdown.

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Blend has become the first social housing issuer to return to the bond markets after the Russian invasion of Ukraine caused a temporary shutdown #UKhousing #SocialHousingFinance

“The pandemic era of record-low rates is well and truly over. Supply chain chaos and inflation raised this prospect earlier in the year, and now the turmoil caused by the invasion of Ukraine has proved it beyond doubt” – Piers Williamson, THFC #UKhousing

Prior to the pause in issuance, Peabody had been the sector’s last issuer, pricing its 12-year, £350m debut sustainability bond at gilts + 125bps on 23 February – the day before Russia’s invasion rocked financial markets and led to a freeze.

Pricing £107m of bonds in a tap to its 2047 and 2054 maturities on Thursday (3 March), Blend’s issuance also marked the first long-dated bond issuance in the sterling markets since January.

The funder, which is a subsidiary of The Housing Finance Corporation (THFC), said that the orderbook was five times oversubscribed, and achieved a spread of 142 basis points (bps) over gilts for the 2054 bonds and +132bps for the 2047 maturity. This led to an all-in rate of 2.95 per cent and 2.90 per cent respectively – which marked a tightening from initial price talk (IPT) of 18 basis points.

Blend said that the new issue premium of 14 or 15 basis points in place was “comparable to the average in the sector’s issuance prior to the eruption of conflict in Eastern Europe”.

The proceeds of the issuance will be on lent to three associations – existing borrowers Connect (£30m) and Trent & Dove (£55m), and new customer Trust (£22m). Of this, £32m will be issued on a spot basis, with the remainder split into deferred drawdown for periods of six, 12 and 15 months.

Blend became the first aggregator to offer deferred issuance to its borrowers, in October 2020, and the latest deal brings Blend’s total deferred issuance to £325m.

Piers Williamson, chief executive of Blend and THFC, said that the transaction demonstrated that associations would always be able to attract investment, but cautioned that the “pandemic era of record-low rates is well and truly over”.

He said: “After market events like the one we are witnessing, there is rarely a rush to be the first issuer to return, but thanks to the experience and skill of Blend’s execution team, we have managed to achieve a great rate for our three new borrowers. During the 2008 crash and later on in the volatile Brexit period and throughout the pandemic, THFC has always been able to deliver. Today is a reminder of the enduring strength of the social housing sector which makes it so reliably attractive to investors.”

He added: “What we can see, though, is that the pandemic era of record-low rates is well and truly over. Supply chain chaos and inflation raised this prospect earlier in the year, and now the turmoil caused by the invasion of Ukraine has proved it beyond doubt.

“That said, Blend has demonstrated with this transaction that housing associations will always be able to attract investment. While not comparable to the rates seen during the lockdowns, 3% is fantastic value against a backdrop of persistently high inflation and expectations of base rate hikes by central banks.”

Connect owns 3,400 homes across West Yorkshire, and was an existing borrower through THFC, through a loan signed in 1998 that matured in December 2021.

Trent & Dove own or manage around 6,000 properties across East Staffordshire, South Derbyshire, and North West Leicestershire. It is also a previous borrower from THFC – with an existing loan through its Funding No3. bond.

New borrower Trust is one of Scotland’s largest housing, support and care services, with more than 3,600 homes, and represents Blend’s (but not THFC’s) first Scottish borrower.

Helen Lennon, chief executive at Connect, said: “The funds from today’s loan will support our core purpose; to tackle inequality and create opportunity for tenants through good homes and communities.”

Jan Griffiths, director of resources at Trent & Dove, said: “This funding will support Trent & Dove’s primary objective of transforming homes, lives and communities while enabling our emerging vision for further housing development up until 2027 to become reality.”

Zoe Purdie, director of finance and people at Trust Housing Association, said: “For a 30-year fixed rate this represents huge value, and will give us the certainty and liquidity needed to continue implementing our bold three-year strategy, ‘The Time is Now’.”

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