Bromford raises £90m to refinance legacy loan as it ‘proactively optimises’ book
Bromford has raised £90m of new funding through two concurrent transactions – one public and one private – to refinance an existing bank loan with a legacy funder.
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The repayment follows a year in which Bromford has been “working hard to proactively optimise [its] loan book”, the group’s head of treasury has said.
In a publicly listed transaction on 17 December, the housing association executed a forward purchase agreement for the issue of £50m of secured bonds, with an all-in coupon of 2.554 per cent.
The issue shares the same terms as the provider’s £300m debut own-name bond, but with a tenor of 34 years, which it said would spread refinancing risk. The April 2018 debut issue had a 30-year tenor.
The drawdown on the new 2054 bonds is deferred, with proceeds expected to be received on 17 March 2020.
In a separate transaction the same day, Bromford agreed a £40m private placement with an undisclosed investor. The funding has a three-month deferred drawdown.
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Imran Mubeen, head of treasury at Bromford, told Social Housing that prompt pricing of the new debt before the December break had enabled it to remove refinancing risk and benefit from a “sub-par redemption” of the loan.
He said: “This deal presented us with an ideal opportunity to replace a non-active lender and a legacy debt structure with an active investor over a significantly longer tenor and with lighter covenants.”
The identity of the legacy lender was not disclosed but Mr Mubeen said it was “non-active”.
Newbridge Advisors acted as lead arranger on the deal and advised Bromford on the debt repayment, with Trowers & Hamlins as legal advisor.
Mr Mubeen said: “Given the anticipated market uncertainty ahead of the general election, we were not prepared to countenance any refinancing or pricing risk for the replacement debt.
“We were supported by Newbridge and Trowers to mobilise quickly to agree new market-leading pricing for the replacement funding before settling the existing loan.
Stable outlook
On 18 December, the outlook on Bromford’s A+ credit rating from Standard & Poor’s was revised from negative to stable by the agency, along with nine other housing associations, in line with its action on the outlook of the UK sovereign.
Bromford’s Moody’s rating is A2 (stable) following a downgrade from A1 (negative) in June 2019, which the agency said reflected higher gearing and continued growth ambitions. Mr Mubeen told Social Housing at the time that Bromford had been “very open” with funders about the group’s journey to an A2 rating in line with its growing development programme. He said that the message had been “received positively by the investor community”.
Commenting on the group’s latest fundraising exercise, he said: “Delivering this deal within a matter of weeks against the backdrop of the election and in the lead up to the Christmas break is a testimony to our ability to engage with the markets in a dynamic, deal-focused way.
“Most importantly, the refinancing will deliver significant savings over the life of the loan and allow us to focus resources on delivering more social and affordable homes across our key geographies.”
Funders’ legal advice was from Addleshaw Goddard on the listed bond, and Pinsent Masons on the private placement.
Bromford’s latest fundraising follows the £50m private placement it completed on 12 August, securing a 12-month deferral and an all-in coupon of just 2.26 per cent.
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