CHP sells retained bonds at lower all-in cost but wider spread than 2013 issuance
Essex housing association CHP has sold £75m of retained bonds at a spread of 155 basis points over gilts
The 25-year deal was done with five investors on 21 November 2017 at an all-in cost of 3.377 per cent and follows CHP’s initial issuance in 2013. It priced over the Treasury 4.50% 2042 gilt.
CHP – formed through a large-scale voluntary transfer with Chelmsford Borough Council in 2002 – entered the public bond market in December 2013 with a £200m issue, including the £75m retained.
The £125m was done at a tighter margin of 125 bps, but with gilt yields higher than today’s rates it resulted in an all-in cost of 4.792 per cent.
The proceeds from the retained bonds – issued through funding vehicle Myriad Capital at a coupon of 4.75 per cent – will be used to fund the company’s development programme, which aims to deliver around 1,000 new homes over the next two to three years.
CHP owns and manages more than 9,400 properties in Essex, with over 86 per cent of its stock composed of general needs and supported housing units.
It has an A+ (negative) rating with Standard & Poor’s. It was rated AA- in 2013.
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Paul Edwards, director of resources at CHP, said: “We felt it was the optimum time for CHP to issue its retained bonds and we are pleased with the outcome. It has secured valuable funds to help us acquire and build more homes across Essex over the next few years.”
He said attracting “high-quality institutional investors... shows confidence in us as a respected provider of affordable homes.”
Mr Edwards said benefits of the retained bonds include a reduction in the initial cost of carry, along with flexibility to access the market at relatively short notice with the investor marketing “fast-tracked”.
The documentation process and associated cost is limited due to the placement being categorised as a secondary sale.
Bookrunners were Lloyds Bank and Barclays Bank.
CHP’s funding adviser was Centrus and legal advice was supplied by Trowers & Hamlin.
Savills provided the funders’ valuations while Allen & Overy was the funders’ legal adviser.
Previously, in November last year, Places for People (PfP) issued £250m of unsecured debt to buy back some existing bonds. The new 11-year bonds priced at 230 basis points over the gilt and a coupon of 3.625 per cent.
Housing & Care 21, Catalyst, WM Housing and Notting Hill Housing all issued long-dated, secured own-name bonds between October and early November at spreads between 130 and 138 basis points.
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