Bromford closes deferred £50m private placement at 2.26%

News13 Aug 2019Sarah Williams

Midlands-based housing association Bromford has agreed a 12-month deferral on a £50m private placement as it looked to capitalise on low gilt rates, achieving an all-in coupon of just 2.26 per cent.

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Housing provider @Bromford closes deferred £50m private placement at an all-in coupon of just 2.26% #ukhousing #socialhousingfinance

Housing assocation @Bromford becomes latest provider to secure deferred funding ahead of Brexit as low gilt rates prevail #ukhousing #socialhousingfinance

The deferred drawdown sees the housing association, which also operates in the South West, become the latest provider to obtain a deferral in recent deals.

Placed with an undisclosed sole UK investor, the funding package is fully secured, and has a 14-year maturity with bullet repayment.

The deal, issued yesterday (12 August), brings the group’s new funding since completing its double merger with Merlin and Severn Vale to £550m.

Bromford will put the additional £50m towards delivering its new homes programme, which is targeting the delivery of 13,000 new homes by 2028.

Mr Mubeen said that a high volume of investor enquiries following Bromford’s annual investor update was testimony to “strong financial performance, the viability of [the group’s] updated business plan and the attraction of [its] renewed strategic focus”, and noted that this came despite its recent downgrade to A2 from A1 by credit ratings agency Moody’s.

The treasury director told Social Housing at the time of the downgrade in June – which cited continued growth ambitions, increasing market sales exposure and higher gearing over the next three years – that Bromford had been “open with investors” about its journey towards the lower rating as it ramped up development.

Commenting on today’s announcement, Mr Mubeen said: “It is particularly pleasing to retain the highest level of investor confidence and interest after our recent Moody’s regrade as the key strengths of our business remain apparent.

“We will continue to proactively engage the investor community and look forward to strengthening existing relationships and forming new ones. Our mantra is simple: the greater our savings on funding costs, the more we can spend on delivering the Bromford proposition to more customers.”

Grant Vaughan, partner at Newbridge Advisors, which arranged the deal, added: “This transaction further demonstrates Bromford’s strong standing in the capital markets.

“The structure allows Bromford to de-risk its future financing needs while locking in historically low interest rates.”

The placement was issued by the group’s registered parent Bromford Housing Group, and will be on-lent to its subsidiaries.

Trowers & Hamlins and Pinsent Masons acted as legal advisors.

Social Housing special reports

Each month Social Housing focuses on a specific aspect of housing finance and collates and scrutinises the data for hundreds of housing organisations.

The reports below contain unparalleled commentary and analysis along with detailed sortable and searchable data tables.

Unit costs 2019 Our analysis of data from the English regulator has found that unit costs have risen among all types of housing association, with overall maintenance costs seeing the highest weighted average increase of nearly seven per cent

Impairment 2019 Housing associations’ impairments rise almost 40% in a year, driven by fire safety costs, contractor insolvencies and reduced land values

Global accounts 2018/19 Housing associations’ surplus for the year before tax decreased by five per cent to £3.76bn, driven by a 6.6 per cent drop in England

Affordable rent profile 2018/19 The level of affordable lettings dropped for the third year in a row

Staff pay Data from audited accounts of 206 housing associations shows that average staff pay in 2018/19 was £31,787 – a rise of 3.2 per cent over a 12-month period

Professionals’ league Our exclusive professionals’ league finds that activity continued apace in 2019, when housing associations increasingly looked to private placements

Sales proceeds Despite a 10 per cent rise in housing associations’ income from development sales in the last financial year, sales revenue is likely to remain flat over the coming years as a result of the property market downturn

Capital commitments The total capital commitments of 200 housing associations rose by 15 per cent in the past year, analysis by Social Housing has found

Reliance on sales surplus Social Housing finds that the total sales surplus of 150 English registered providers has dropped by nearly 10 per cent, as a result of lower market sales surplus

Stock dispersal How many council areas does your housing association operate in? How concentrated is its stock?

Accounts digest 2018/19 How does your housing association’s finances compare to others?

Housing Revenue Account part two How do councils compare in their 2018/19 Housing Revenue Account positions? Steve Partridge of Savills takes an in-depth look

Diversi fication of income We look at how housing associations are diversifying their income, and finds that they made 10.3 per cent more revenue from shared ownership and non-social housing activity

Impairment 2017/18 Social Housing takes a close look at the accounts of the 130 largest housing associations, and finds that impairments rose by nearly a third to £78.4m in 2018

Global accounts Social Housing’s analysis of the sector’s global accounts finds that housing associations’ pre-tax surplus fell last year – driven by drops in England, Scotland and Wales (August 2019)

Affordable rent profile We find that the number of affordable rent lettings recorded last year by housing associations in England has dropped for the second year in a row, suggesting that the sector is shifting away from the tenure

Capital commitments We scrutinise the capital commitments of the 208 largest housing associations in the UK (June 2019)

Housing Revenue Account part one Steve Partridge of Savills takes a look at the financial factors councils should consider in their Housing Revenue Account business planning (May 2019)

Reliance on sales surplus Our analysis reveals that profits form 42 per cent of 150 English housing associations’ total surplus (April 2019)

Sales proceeds We look at housing associations’ build-for-sale income and find a two per cent increase in 2017/18 (March 2019)

Shared ownership sales England, excluding London, has seen a four per cent rise in shared ownership sales – much lower than last year’s 16 per cent increase (February 2019)

Stock dispersal We show that housing associations’ general needs stock is becoming more concentrated within their local authority areas (January 2019)

Click here to find more special reports