CHP secures first private placement in £150m deal

While the pricing was undisclosed, Neil Perrins, chief financial officer at CHP, told Social Housing that the landlord was “very pleased” with the overall outcomes. He said there was good pricing beneath the target the landlord was aiming for, which is “great in terms of overall weighted average cost”.

Mr Perrins described both the spread and the covenants as “very good” and said that the bid book for the private placement was more than nine times oversubscribed, showing that “demand is still out there”.

“We’re also very pleased with the number of investors who expressed an interest, and ultimately, very pleased with how the overall set of covenants came together – we didn’t have to concede very much to get what works for us,” he said.

“We’ve got the right funding that allows us to keep maximising what we can do to meet the housing crisis and invest in environmental improvements to existing properties.”

Mr Perrins said that CHP was aiming for a £100m issuance but after “very good feedback early on”, he received the appropriate approval to go up to £150m.

He said: “Because the interest was so strong we ended up increasing the size to £150m which incorporated a 12-month delay for a very small deferral premium. There was an awful lot of demand out there, and investors were particularly keen on longer dated money. In turn, that competition helped drive a very good spread on the 25-year money, hence why we opted for a multi-tranche structure. 

“We were comfortable taking more funds because ultimately, we have a corporate strategy that includes an ongoing development programme. 

“We need about £50m a year of incremental funding, and therefore being able to get next year’s requirement secured at the same time avoids the funding exercise cost again. So, we’ve actually managed to do two exercises in one with a tiny deferral premium, which was cheaper than a further round of raising capital again in the relatively near future.”

CHP first accessed the capital markets in 2013 with a £250m listed bond. This transaction represents its first venture in the private placement market. 

“Now, positively, we’ve got five new relationships with UK and North American investors, which just gives us that broader set of channels to tap into in the future,” Mr Perrins said.

“The banking route is currently competitive, but covenants tend to be more restrictive. On the other hand, bond issuances have a much bigger set of requirements and processes to go through.

“Meanwhile, a private placement gives access to the capital markets and also gives you an ability to relatively easily repeat and access that again in the future, particularly with investors that you can build relationships with. And we ended up with very good covenants and have that flexibility in the future of how we move forward.”

Mr Perrins said that while many housing associations have understandably scaled back on their development aspirations to meet other pressures, CHP remains committed to an “ambitious housebuilding programme”, alongside investing in its existing homes. 

According to its 2023-24 financial results, the landlord built 201 homes during the year and reported that 74 per cent of all its homes were at Energy Performance Certificate Band C or above.

“We want to continue to build homes to help tackle the housing crisis that are not only affordable and energy-efficient but, crucially, that people want to live in, too,” said Mr Perrins.

The transaction was arranged by Lloyds Securities and NabSecurities, with both acting as joint placement agents.

Newbridge Advisors advised CHP on the deal, Devonshires served as the landlord’s lawyers, and Pinsent Masons carried out the legals for the investors. JLL conducted the valuation, and M&G served as the security trustee.

Chris Evans, director at Newbridge Advisors, said: “Choosing when and how to access the capital markets requires detailed consideration, especially given the ever-growing options available to the housing association.

“The success of the transaction and the establishment of new lasting relationships puts CHP in a fundamentally stronger position going forward.

“The extensiveness of interest from investors throughout the process reflects the quality of CHP as an investment, as reflected by S&P with its latest rating review [in October]. We are thrilled to have worked with CHP on this transaction.”

Rory Brown, director of private placements at Lloyds, said that the bank is committed to playing its part in helping organisations like CHP to increase the provision of “quality, affordable housing” in the UK.

“It has been a pleasure to support CHP’s ambition to help address the housing shortage in its local area with this important financing," he said.

CHP is graded G1/V2 by the Regulator of Social Housing.

According to its 2023-24 financial results, CHP posted a surplus of £7.4m during the year, up from £2.5m in the previous year.